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Liggon-Redding v. American Security Insurance Co.

September 23, 2009

ELIZABETH LIGGON-REDDING, PLAINTIFF
v.
AMERICAN SECURITY INSURANCE CO. AND NATIONAL CITY MORTGAGE CO., DEFENDANTS



The opinion of the court was delivered by: Judge Munley

MEMORANDUM

Before the court are Defendants National City Mortgage Company ("National City") and American Security Insurance Company's ("American Security") defendants' motions to dismiss. The defendants seek dismissal both for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and for failure to join pursuant to Rule 12(b)(7). (Doc. Doc. 24; 27-2). The motions have been fully briefed by all parties and this matter is ripe for disposition.*fn1

BACKGROUND

From the evidence of the record, taken in a light most favorable to the Plaintiff Elizabeth Liggon-Redding, the pertinent facts are as follows.Plaintiff owned a home located at 451 Fawn Road in Jim Thorpe, PA. (Amended Complaint (Doc. 22) at ¶ 5) (hereinafter "Am. Complt."). A deed to the property indicates that the plaintiff's husband, Tyrone N. Redding, was a co-owner of the property. (Motion to Dismiss by National City Mortgage Co. (Doc. 24), Ex. A) (hereinafter "the deed"). Moreover, the plaintiff and her husband are named in the deed as trustees of the estate for beneficiaries Stewart A. Liggon and Brandi C. Liggon. (Id.)

Fire of an unknown cause destroyed the home on July 29, 2004. (Am. Complt. at ¶10). At the time, National City was the mortgage holder of the property, while Defendant American Security provided the residential insurance coverage. (Id. at ¶ 7). Although not averred in the complaint, National City presents documents in the public record indicating that the home was involved in protracted foreclosure proceedings commencing in August 2001.*fn2 (Motion to Dismiss by National City at ¶ 6). At the time of the fire loss, the insurance policy listed National City as the insured/mortgagee and plaintiff as the additional insured. The policy provided liability coverage of $149,000. (Am. Complt. at ¶8). National City asserts that it was paying premiums to American Security for "forced placed" hazard insurance on the property at the time of the loss because the plaintiff defaulted on her obligations to keep her home insured while it was mortgaged. (Motion to Dismiss by National City at ¶ 7-8).

The plaintiff asserts that the home was fully furnished and was not vacant when the fire occurred. Under the terms of the residential insurance policy, Defendant American Security was responsible for the full replacement value of the home, according to the plaintiff. (Am. Complt. at ¶ 11). Moreover, the plaintiff alleges deliberate undervaluation of the home by American Security's claim adjusters. (Id. at ¶ 31). Since American Security did not pay for the full replacement value of the home, the plaintiff alleges breach of contract and bad faith claims against them. (Id. at ¶¶ 36-46).

The first inspection by Defendant American Security's adjuster in September 2004 estimated the repair or replacement value of the plaintiff's home at $71,874.97. The actual cash value of the home was appraised at $39,281.23 and a check in that amount was forwarded to National City. (Id. at ¶ 12). A year before the check was issued, the plaintiff secured a default judgment in magisterial court related to property damage caused by National City or its agents while the home was in foreclosure. National City appealed the default judgment to the Court of Common Pleas.*fn3 Some time later, National City and the plaintiff settled that case by a formal written agreement titled "General Release of Any and All Liability," dated February 11, 2005. (Complaint (Doc. 1), Ex. D)(hereinafter "Complt."). In exchange for the plaintiff releasing and discharging any legal claims against National City, National City agreed to the release and satisfaction of the mortgage, applying $39,281.23 to the plaintiff's mortgage account. (Am. Complt at ¶ 12). The plaintiff asserts that National City agreed to accept this amount to satisfy the mortgage. (Id. at ¶ 15). However, National City did not actually release the mortgage until December 30, 2005, after several important events occurred. (Complt., Ex. B, "Release of Mortgage Form").

In March 2005, upon the plaintiff's request, a second adjuster from Defendant American Security inspected the home, estimating the repair or replacement value to be $92,624.80 and the actual cash value to be $71,790.91. (Am. Complt. at ¶¶ 17-18). American Security issued a "supplemental" check made payable to National City and Plaintiff LiggonRedding on June 16, 2005 in the amount of $20,427.60 in June 2005. (Id. at ¶ 19; See Complt., Ex. E). On December 1, 2005, another "partial" check in the amount of $28, 283.66 was made payable to National City and the plaintiff by American Security. (Am. Complt. at ¶ 21; See Complt., Ex. F). The plaintiff avers that National City accepted and deposited the supplemental checks in breach of the "General Release of Any and All Liability" agreement. (Id. at ¶¶ 21, 23).

Also on December 1, 2005, American Security issued a "partial" check made payable to the plaintiff in the amount of $3,173.81. However, the plaintiff avers that she is entitled to the balance of the $149,000 insurance policy on her home at the time of the loss, including the $48,711.26 that National City received after American Security reinspected the home. (Id. at ¶ 29).

In the period between National City's receipt of supplemental insurance checks, the plaintiff and National City apparently entered into another formal, written agreement titled "General Release of Any and All Liability with Single Exception" on October 17, 2005 under terms similar to the February 2005 agreement. Ostensibly, the single exception in this agreement was that the general release of liability did not apply to the claims asserted in a civil lawsuit filed in United States District Court for the Eastern District of Pennsylvania, which has since been dismissed.*fn4 (Motion to Dismiss by National City, Ex. B).

The plaintiff filed suit against National City and American Security in this court on January 30, 2006. (Doc. 1). We originally dismissed the case for lack of jurisdiction pursuant to 28 U.S.C. § 1332. (Doc. 5). Plaintiff appealed and the Court of Appeals for the Third Circuit, remanded the case to this court (Doc. 12), and plaintiff filed an amended complaint. (Doc. 14). In the amended complaint, the plaintiff brings breach of contract and bad faith claims against American Security. (Am. Complt. at ¶¶ 36-46). A breach of contract claim and a tort claim for intentional interference with contractual relations are brought against National City. (Id. at ¶¶ 47-53). Both defendants subsequently filed motions to dismiss pursuant to Rule 12(b)(6) and 12(b)(7) of the Federal Rules of Civil Procedure, bringing the case to its present posture.

JURISDICTION

The plaintiff is a citizen of Pennsylvania. (Id. at ¶ 1). Defendant American Security is a Delaware corporation with business addresses in Miami, Florida and Atlanta, Georgia. (Id. at ¶ 2). Defendant National City is an Ohio corporation. (Id. at ¶ 3). By combining damage claims against each defendant, the amount in controversy exceeds $75,000. (Id. at ¶ 4). As such, this court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. The substantive law of Pennsylvania shall apply to the case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000), citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938).

DISCUSSION

A. Defendants' Motion to Dismiss for Failure to Join a Party Under Rule 19 Standard of Review - 12(b)(7)

Rule 19 of the Federal Rules of Civil Procedure specifies the circumstances when joinder of a party is compulsory. A defendant may move to dismiss a complaint for plaintiff's failure to join a party in accordance with Rule 19. FED. R. CIV. P. 12(b)(7). Courts considering a motion pertaining to Rule 19 follow a multi-step inquiry. See Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306, 312 (3d Cir. 2007); Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 404 (3d Cir. 1993) (hereinafter "Janney"). The reviewing court must first determine whether the absent party "should be joined as [a] 'necessary' part[y] under Rule 19(a)." Gen. Refractories Co., 500 F.3d at 312. Rule 19(a) provides:

A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if: (A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

FED. R. CIV. P. 19(a).

If a "necessary" party should be joined, but "joinder is not feasible inasmuch as it would defeat diversity of citizenship. . ." courts must next "determine whether the absent parties are 'indispensable' under Rule 19(b)." Gen. Refractories Co., 500 F.3d at 312. There are four factors for courts to consider in determining whether a party is "indispensable":

(1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by: (A) protective provisions in the judgment; (B) shaping the relief; or (C) other measures; (3) whether a judgment rendered in the person's absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for non-joinder.

FED. R. CIV. P. 19(b); General Refractories Co., 500 F.3d at 320-321 (3d Cir. 2007) (analyzing all four factors).

In the Third Circuit, if a non-joined party is determined to be "indispensable," the action cannot go forward. Gen. Refractories Co., 500 F.3d at 312 (citing Janney, 11 F.3d at 404); Bank of Am. Nat'l Trust & Sav. Ass'n v. Hotel Rittenhouse Assocs., 844 F.2d 1050, 1053-54 (3d Cir. 1988).

In a motion to dismiss on the pleadings, courts must "accept all factual allegations in the complaints and all reasonable inferences to be drawn therefrom in the light most favorable to the plaintiffs." Lorenz v. CSX Corp., 1 F.3d 1406, 1411 (3d Cir. 1993). Moreover, the burden is on the party filing the motion to prove that a non-joined party is indispensable to the adjudication of the action. See F.D.I.C. v. Beall, 677 F. Supp 279, 283 (M.D.Pa. 1987); Am. Home Mortgage Corp. v. First Am. Title Ins. Co., No. 07-1257, 2007 WL 3349320, at *3 (D.N.J. ...


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