Bank of Camilla v. St. Paul Mercury Ins. Co.

• Decision Date: 29 March 2013
• Docket Number: Case No. 1:12–CV–15 (WLS).
• Citation: 939 F.Supp.2d 1299
• Parties: BANK OF CAMILLA, Plaintiff, v. ST. PAUL MERCURY INSURANCE CO., Defendant.
• Court: U.S. District Court — Middle District of Georgia

939 F.Supp.2d 1299

BANK OF CAMILLA, Plaintiff,

v.ST. PAUL MERCURY INSURANCE CO., Defendant.

Case No. 1:12–CV–15 (WLS).

United States District Court,

M.D. Georgia,

Albany Division.

March 29, 2013.

Stuart Walker, Martin Snow LLP, John T. McGoldrick, Jr., Macon, GA, for Plaintiff.

Michael D. Hoffer, William T. Mitchell, Cruser & Mitchell, LLP, Christopher Conway, Norcross, GA, J. Price Collins, Jennafer Groswith, Dallas, TX, for Defendant.

ORDER

W. LOUIS SANDS, District Judge.

Before the Court is Defendant's Motion for Judgment on the Pleadings (Doc. 13), Plaintiff's Motion for Summary Judgment (Doc. 15), and Defendant's Cross–Motion for Summary Judgment (Doc. 18). For the following reasons, Defendant's Motion for Judgment on the Pleadings (Doc. 13) is GRANTED, and Plaintiff's Motion for Summary Judgment (Doc. 15), and Defendant's Cross–Motion for Summary Judgment (Doc. 18) are both DENIED WITHOUT PREJUDICE.

PROCEDURAL BACKGROUND

Defendant filed its Motion for Judgment on the Pleadings (Doc. 13) on July 27, 2012. Plaintiff's Response (Doc. 15) was filed as both a Motion for Summary Judgment and a Response to Defendant's Motion for Judgment on the Pleadings. ¹ In an abundance of caution, Defendant filed both a Reply to its Motion for Judgment on the Pleadings (Doc. 17) and its own Cross–Motion for Summary Judgment (Doc. 18). Defendant then filed a Response (Doc. 19) to Plaintiff's Motion for Summary Judgment, but also characterized the Response (Doc. 19) as a brief in support of its own Cross–Motion for Summary Judgment. Plaintiff issued a final Reply (Doc. 20) against all motions and responses filed by Defendant.

While Federal Rule of Civil Procedure 12(d) allows the Court to convert a motion under Rule 12(b)(6) or 12(c) if matters outside the pleadings are presented to and not excluded by the Court, the rule makes no provision for a party to unilaterally convert a response to a Rule 12(c) motion into an entirely new motion for summary judgment. To do so would result in the present situation: an infinite loop of responses and replies, with a periodic motion to restart the cycle. The appropriate procedure would have been to separately file a Response and, if desired, a separate motion for summary judgment. The Court will not condone Plaintiff's failure to properly do so, especially when it caused the resulting filing of a dispositive motion for no other reason except to address Plaintiff's erroneous filing. ( See Doc. 17 at 1.) Accordingly, the Court will consider Plaintiff's filing at Docket No. 15 solely as a Response to Defendant's Motion for Judgment on the Pleading, and will not consider all filings that are responsive to Plaintiff's Motion for Summary Judgment, including Defendant's Response (Doc. 19) and Plaintiff's Reply (Doc. 20). The Court also DENIES WITHOUT PREJUDICE Defendant's Cross–Motion for Summary Judgment (Doc. 18) and Plaintiff's Motion for Summary Judgment (Doc. 15). The Court finds that only Defendant's Motion for Judgment on the Pleadings (Doc. 13) is fully and properly before the Court, briefed, and ripe for ruling.

FACTUAL BACKGROUND

1. The 2007 Policy

In 2007, Defendant issued its SelectOne for Community Banks Policy No. EC06800739 to Plaintiff, with a Policy Period of January 19, 2007 to January 19, 2010 (the “2007 Policy”). (Doc. 1–6 ¶ 4.)

2. The 2009 Complaint:

In April 2009, Plaintiff was sued in Georgia Superior Court by a group of twenty-one individual investors who purchased debt instruments (“debentures”) issued by Georgia Finance of Grady County, Inc. (“GFGC”). ( Id. ¶ 12.) The 2009 Complaint alleged that the debt instruments were not registered with the Georgia Secretary of State as required by statute and that GFGC was not authorized to sell the debt instruments to the individual investors. (Doc. 1–8 ¶¶ 17–21.)

GFGC was a customer of Plaintiff. ( Id. ¶ 22) The 2009 Complaint alleged that Plaintiff, “notwithstanding its knowledge of these illegal and unauthorized activities by [GFGC] ... continued to provide financial aid to [GFGC] through direct loans, overdraft of checking accounts, and excessive credit card charges,” ( Id. ¶ 26.) The 2009 Complaint also alleged that in return for the financial aid, GFGC issued promissory notes to Plaintiff as collateral for the debt GFGC owed Plaintiff. ( Id. ¶¶ 23, 27.) Specifically, on September 5, 2008, Plaintiff was alleged to have procured promissory notes, secured by a security agreement and perfected by a financing statement, from GFGC that consisted of the bulk, if not all, of GFGC's assets, as further collateral for the debt owed to Plaintiff. ( Id.) Plaintiff was alleged to have withheld the September 5, 2008, financing statement from the public record until after GFGC defaulted on the security agreement. ( Id. ¶ 30.) The Complaint contended that on February 5, 2009, GFGC consented to delivery to Plaintiff of all property described in the September 5, 2008, promissory note, security agreement, and financing agreement, which “destroy [ed] the business of [GFGC].” ( Id. ¶ 32.) On February 10, 2009, Plaintiff allegedly gave notice to GFGC and each of the individual investors that it “intended to dispose of the collateral of which it had taken possession ‘privately on or after February 20, 2009.’ ” ( Id. ¶ 33.) Plaintiff allegedly disposed of the property prior to February 20, 2009 to Greene, “a corporation owned by a close relative to an insider of [Plaintiff],” and the individual investors argued that Plaintiff did not receive a reasonably equivalent value in exchange. ( Id. ¶¶ 33–35.) The individual investors accused Plaintiff of “destroying the business of [GFGC], and its going concern value, to the detriment of [the individuals],” thus violating the provisions of the Georgia Uniform Fraudulent Transfer Act. ( Id. ¶¶ 37–38.) The individual investors also accused Plaintiff of violating the terms of the UCC by not disposing of the collateral in a “commercially reasonable manner as to method, time, place, or terms.” ( Id. ¶ 36.)

3. Plaintiff's Admissions as to the Applicability of the 2007 Policy to the 2009 Complaint:

In Plaintiff's state court Complaint, it asserted that because the individuals' claims in the 2009 Complaint fell within the definition of a “Lending Act,” and the 2007 Policy excluded coverage for any “Lending Act,” Plaintiff did not inform Defendant of the 2009 Complaint at the time it was filed. (Doc. 1–6 ¶ 15.)

4. The 2010 Policy:

In December 2009, Plaintiff submitted to Defendant an application to renew Plaintiff's existing insurance coverage and add a new insuring agreement, the Bankers Professional Liability Insuring Agreement. (Doc. 14–1 at 23–25.) The Bankers Professional Liability Insuring Agreement added two new coverage areas, Lending Act Coverage and Professional Service Act Coverage. ( Id.) In 2010, Defendant issued Plaintiff its renewal SelectOne for Community Banks Policy No. EC06801618 with a Policy Period of January 19, 2010 to January 19, 2011 (the “2010 Policy”). The 2010 Policy included separate Insuring Agreements for Management Liability, Employment Practices Liability, Fiduciary Liability, and Bankers Professional Liability. (Doc. 1–12 at 11.) Defendant's duty in all four Insuring Agreements did not extend to the duty to defend. ( Id. at 12–13.) The “prior litigation” date exclusion for the Fiduciary Liability Insuring Agreement and the Bankers Professional Liability Insuring Agreement was January 19, 2010. ( Id.)

5. The 2010 Recast Petition:

On October 27, 2010, the individual investors filed their Amendment and Recast Petition. (Doc. 1–15 at 27.) The Recast Petition deleted the majority of the factual allegations and all of the demands of the 2009 Complaint. It replaced both with allegations of a Ponzi scheme where GFGC used the money provided by the individuals to “liquidate prior investments to other investors, to make the monthly investment return payments to investors, to cover personal and business expenses, to fund [GFGC's President's] gambling activities, and to cover overdrafts with Plaintiff.” (Doc. 1–15 ¶ 18.) The Recast Petition alleged that Plaintiff knew of GFGC's “true financial condition,” was a part of GFGC's Ponzi scheme, and “willfully, knowingly, intentionally, and for compensation, repeatedly misrepresented to the [individuals] ... the true financial condition of [GFGC].” ( Id. ¶¶ 22–25.) Based on these factual allegations, the Recast Petition alleged a common-law fraud claim and a RICO claim against Plaintiff and GFGC. ( Id. ¶¶ 26–40.)

6. Requests for Coverage

In a letter dated November 22, 2010, Plaintiff informed Defendant of the Recast Petition and made a demand on Defendant for coverage under the policies issued by Defendant to Plaintiff. (Doc. 1–16 at 31–32.) By letter dated January 21, 2011, Defendant denied coverage under the 2010 Policy for the Recast Petition. (Doc. 1–16 at 33–36.) On June 1, 2011, Plaintiff and the individuals settled the fraud and RICO claims for $750,000. (Doc. 1–6 ¶ 30.) On December 29, 2011, Plaintiff filed the instant action against Defendant in the Superior Court of Mitchell County, Georgia, alleging breach of contract and bad faith for failing to provide insurance coverage for claims made against Plaintiff for fraud and conspiracy in the Recast Petition. (Doc 1 at 1.) The case was removed to this Court on February 3, 2012. ( Id.)

DISCUSSION

I. Standard of Review

Under Federal Rule of Civil Procedure 12(c), a party may make a motion for judgment on the pleadings after the pleadings are closed, but not early enough to delay trial where a complaint “fail[s] to state a claim upon which relief can be granted.” “Judgment on the pleadings is appropriate where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law.” Palmer & Cay, Inc. v. Marsh McLennan Cos., Inc., 404 F.3d 1297, 1303 (11th Cir.2005). The standard of review for a motion for judgment on the pleadings “is almost identical to...