Opinion
No. 2010 CA 1816.
March 25, 2011.
ON APPEAL FROM THE 22ND JUDICIAL DISTRICT COURT, IN AND FOR THE PARISH OF ST. TAMMANY, STATE OF LOUISIANA TRIAL COURT NO. 2007-14533 HONORABLE REGINALD T. BADEAUX, JUDGE PRESIDING.
Terrence J. Lestelle, Andrea S. Lestelle, Jeffrey B. Struckhoff, Richard M. Morgain, Metairie, LA, Attorneys for Plaintiffs-Appellants, Kevin Young and Linda Young.Robin B. Cheatham, Scott R. Cheatham, New Orleans, LA, Attorneys for Defendant-Appellee, Central Progressive Bank.
BEFORE: KUHN, PETTIGREW, AND HIGGINBOTHAM, JJ.
Plaintiffs, Kevin and Linda Young ("the Youngs"), appeal the trial court's grant of summary judgment in favor of defendant, Central Progressive Bank ("CPB"). For the following reasons, we affirm.
Facts and Procedural History
The Youngs own property located at 125, 126 and 136 Fremaux Avenue ("the Property") in Slidell, Louisiana. On January 4, 2002, the Youngs executed a loan application with CPB. Attached to the loan application was a Flood Insurance Notice as required by federal law. On January 21, 2002, the Youngs entered into a mortgage agreement with CPB whereby CPB agreed to extend credit to the Youngs in exchange for a mortgage on the Property. The mortgage agreement indicates that if the mortgagor fails to maintain insurance, the mortgagee may purchase such insurance coverage. In 2002, the Youngs purchased a flood insurance policy on the Property and renewed the policy in 2003. CPB, in August 2002 and August 2003, sent letters to the Youngs stating that if they failed to provide CPB with proof of insurance within certain time limits, insurance coverage would be provided by the bank and the cost of the insurance would be added to the loan balance.
In August 2005, Hurricane Katrina struck Louisiana, and, in the days following, the Property suffered flood damage. At the time, there was no flood insurance on the Property. On August 28, 2007, the Youngs filed suit against CPB for damages to the Property alleging that CPB breached its duty of purchasing flood insurance, which was the proximate cause of the damages the Youngs sustained. On November 7, 2007, CPB filed a motion for summary judgment maintaining that the undisputed, material facts demonstrate that CPB had no duty to procure flood insurance coverage on the Youngs' property. On February 9, 2010, the trial court heard argument on the motion for summary judgment. After considering the applicable law and evidence in the record, the trial court granted CPB's motion for summary judgment and dismissed the Youngs' claims with prejudice. A judgment was signed in accordance with the trial court's decision on March 31, 2010. It is from this judgment that the Youngs appeal, designating the following assignments of error:
Several of the documents the trial court relied on were attached to memorandums but not introduced into evidence. However, each document was referred to in the affidavits filed by both parties which satisfied the criteria of LSA-C.C.P. art. 967. See Lewis v. Jabbar, 08-1051 (La. App. 1st Cir. 1/12/09), 5 So.3d 250, 254. Therefore, the evidence was properly considered by the trial court, and the documents are part of the record for this appeal.
1. The Trial Court erred in ruling that CPB did not assume the duty of purchasing flood insurance for the Youngs.
2. The Trial Court erred in ruling that the purchase of flood insurance by CPB would not inure to the benefit of the Youngs.
LAW AND ANALYSIS
Summary judgment is properly granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that mover is entitled to judgment as a matter of law. LSA-C.C.P art. 966B. Summary judgment is favored and is designed to secure the just, speedy, and inexpensive determination of every action. LSA-C.C.P. art. 966A(2) Aucoin v. Rochel, 08-1180 (La. App. 1st Cir. 12/23/08), 5 So.3d 197, 200, writ denied, 09-0122 (La. 3/27/09), 5 So.3d 143. In determining whether summary judgment is appropriate, appellate courts review evidence de novo under the same criteria that govern the trial court's determination of whether summary judgment is appropriate. Boudreaux v. Vankerhove, 07-2555 (La. App. 1 Cir. 8/11/08), 993 So.2d 725, 730.
In moving for summary judgment, CPB contends that according to the clear and unambiguous language of the mortgage agreement, it owes no duty to the Youngs to provide flood insurance on the Property. In support of this contention CPB provided an affidavit executed by the president of the bank and an authentic copy of the executed mortgage agreement.
The mortgage agreement provides in pertinent part:
INSURANCE PROVISIONS. The following insurance provisions are a part of this Mortgage;
Required insurance. Mortgagor shall, at its sole cost, keep . . . the Property constantly insured against loss . . . (including flood insurance, where applicable) as may be required by the Mortgagee . . . Mortgagor agrees to obtain and maintain Federal Flood Insurance, if available, for the full unpaid principal balance of the loan.
* * *
ADDITIONAL ADVANCES FOR SPECIFIC PURPOSES. Mortgagee shall have the right, within Mortgagee's sole option and discretion, to make Additional Advances on Mortgagor's behalf for the following purposes;
Insurance. If Mortgagor should for any reason fail to maintain insurance on the Property as required under this Mortgage, Mortgagee may make Additional Advances on Mortgagor's behalf for the purpose of purchasing and maintaining, and the Mortgagee may purchase and maintain such insurance coverage. (Emphasis added.)
CPB argues that the mortgage agreement contract clearly obligates the Youngs to maintain insurance and that under the terms of the contract there is no duty or obligation on the part of CPB to obtain insurance. CPB notes that "may" is a discretionary term and, therefore, CPB is not required to purchase insurance should the Youngs fail to do so. The Youngs conceded that CPB had no contractual obligation to provide flood insurance.
The Youngs argue that by CPB requiring the Youngs to sign the Flood Insurance Notice prior to executing the loan and in sending the letters to the Youngs regarding lapsed insurance, a duty was created on CPB's part to place flood insurance on the Property if the Youngs failed to do so. The Youngs rely on Crane v. Exxon Corporation, U.S.A., 613 So.2d 214, 221 (La. App. 1st Cir. 1992) writs granted in part on other grounds, and remanded, 620 So.2d 858 (La. 1993) to support their argument. In that case, this court found that if a defendant voluntarily undertakes a task that he has no duty to perform, he must perform that task in a reasonable and prudent manner Crane, 613 So.2d at 221 if necessary for the plaintiff's protection. CPB counters that it had no contractual or other legal duty to protect the Youngs in this case, because the only reason the bank requires flood insurance on the property was to protect its own interest for the balance of the loan.
Duty is a question of law. Harris v. Pizza Hut of Louisiana, Inc., 455 So.2d 1364, 1371 (La. 1984).
Therein, Exxon contracted with Merit for labor to be performed at a Baton Rouge refinery. Although Merit was responsible for maintaining a safe work environment according to the contract, Exxon maintained the right to inspect the job site. An Exxon employee regularly performed such inspections and personally reprimanded Merit for safety violations on the job. Therefore, the court found that Exxon voluntarily assumed the task of monitoring the jobsite for violations of Exxon safety standards and, having assumed the responsibility, Exxon had a duty to perform it in a reasonable and prudent manner.
The Flood Insurance Notice signed by the Youngs in anticipation of the loan with CPB stated "[i]f Grantor fails to purchase or renew flood insurance on the property, [f]ederal law authorizes and requires Lender to purchase the flood insurance for Grantor at Grantor's expense."
The August 2003 letter that the Youngs received from CPB regarding flood insurance stated in bold type: "If you do not provide us with proof of [flood] insurance on or before the expiration dated of your policy, insurance coverage will be provided by the bank." The letter also provided that the cost of the insurance policy would be added to the loan balance, and that any insurance coverage provided by the bank would only secure the loan balance and would not cover contents or any additional value above the loan balance, which may be associated with the collateral.
CPB presented cases that held the lender did not owe a duty to procure flood insurance if the mortgage documents required the homeowner to do so. See Paternostro v. Wells Fargo Home Mortg., Inc., 09-469 (La. App. 5th Cir. 12/08/09), 30 So.3d 45, 48-51; and Oliver v. Central Bank, 26,932 (La. App. 2d Cir. 5/10/95), 658 So.2d 1316, 1323, writ denied, 95-1469 (La. 9/22/95), 660 So.2d 477. However, those cases did not present the same facts as this case, i.e., where after the mortgage agreement was signed, the banks sent letters affirmatively stating that it would provide insurance if the borrower failed to purchase it.
An assumption of duty arises when the defendant (1) undertakes to render services, (2) to another, (3) which the defendant should recognize as necessary for the protection of a third person. Bujol v. Entergy Services, Inc., 03-0492 (La. 5/25/04), 922 So.2d 1113, 1129. While CPB sent letters to the Youngs regarding flood insurance, the Youngs did not provide any evidence that the bank actually assumed responsibility for protecting the interest of the Youngs. The CPB letters clearly stated that if the bank provided insurance it would only be for the loan balance. In this case, because providing insurance would have been only to protect CPB, we cannot conclude that a duty was created in favor of the Youngs.
The Youngs would have benefited from CPB's purchase of insurance because they would not owe the remainder of the loan; however, the insurance would have been purchased solely for CPB, and a duty is not created in favor of an incidental beneficiary. See Oliver, 658 So.2d at 1326. Further, the evidence clearly revealed that the Youngs only received letters in the years 2002 and 2003, but the home was flooded in 2005. Thus, if any duty had been created, it would have been limited to those years that the Youngs actually received the letters.
We find that under these facts, CPB owed no duty to the Youngs. The Youngs cannot establish a claim against CPB under the mortgage agreement contract or negligence theory. Therefore, there is no genuine issue of material fact herein and CPB is accordingly entitled to judgment as a matter of law.
DECREE
The summary judgment granted by the trial court in favor of CPB is hereby affirmed. All costs of this appeal are assessed to Kevin and Linda Young.