Markel American Ins. Co. v. Díaz–Santiago, 11–1101.

Citation674 F.3d 21
Decision Date16 March 2012
Docket NumberNo. 11–1101.,11–1101.
PartiesMARKEL AMERICAN INSURANCE COMPANY, Plaintiff, v. Michael DÍAZ–SANTIAGO; Omayra Rodríguez–Sorrentini; MDS Caribbean Seas Limited, Defendants, Appellants, v. Blue Waters Insurers Corp.; Seguros Javier Calderón, Inc.; Luis F. Padilla–González, Defendants, v. FirstBank of Puerto Rico, Defendant, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

OPINION TEXT STARTS HERE

Laura Maldonado Rodríguez, on brief for appellants.

Cristina Belaval Burger and Martínez Odell & Calabria, on brief for appellee.

Before TORRUELLA, STAHL, and THOMPSON, Circuit Judges.

TORRUELLA, Circuit Judge.

DefendantAppellant Michael Díaz–Santiago (Díaz–Santiago) 1 appeals the district court's grant of summary judgment to Appellee FirstBank of Puerto Rico (FirstBank). Markel Am. Ins. Co. v. Díaz–Santiago, No. 09–1672CCC, 2010 WL 3982292 (D.P.R. Sept. 30, 2010). For the reasons stated herein, we affirm the district court's decision.

I. Background

On October 8, 2008, MDS Caribbean Seas Limited (MDS), a company that Díaz–Santiago incorporated under the laws of the British Virgin Islands, purchased a vessel, the “Black Sea.” That same day, MDS executed a promissory note in favor of FirstBank, which it secured by a preferred ship mortgage (the “Preferred Ship Mortgage” or “Mortgage”), as a form of payment guarantee to FirstBank. Also on October 8, Díaz–Santiago and his wife expressly guaranteed MDS's compliance with the terms of the promissory note and Preferred Ship Mortgage by executing and sending to FirstBank a continuing letter of guaranty, jointly and severally binding themselves to the amount owed should the vessel owner, MDS, default.

Pursuant to the clear terms of the Preferred Ship Mortgage, MDS, as the owner of the vessel, was required to “keep the vessel fully and adequately insured ... in at least the amount of the unpaid principal balance of this Mortgage....” Stated differently, MDS was contractually obligated to insure the Black Sea to protect FirstBank's position as a loss payee. The Mortgage additionally provided in the section entitled, “Default,” that MDS would be liable for any advances, expenditures, or costs that FirstBank incurred for, among other reasons, defending suits related to the Preferred Ship Mortgage and promissory note. The provision states as follows:

5. All advances and expenditures which [FirstBank] in its discretion may make for repairs, insurance, payment of liens or other claims, defense of suits, or for any other purpose whatsoever related hereto or to said note and all damages sustained by [FirstBank] because of defaults, shall be repaid by Owner [MDS] on demand with interest at the same interest rate provided for in the Promissory Note, the payment thereof secured hereby, and until so paid shall be a debt due from Owner [MDS] to [FirstBank] secured by the lien hereof. [FirstBank] shall not be obligated to make any such advances or expenditures, nor shall the making thereof relieve Owner [MDS] of any obligation or default thereto.

(Emphasis added.)

Accordingly, Díaz–Santiago obtained insurance for the vessel. On October 7, 2008, he prepared marine insurance application materials and submitted them to Blue Waters Insurers, Corp. (Blue Waters), an underwriting agent for various insurers, including Markel American Insurance Company (Markel). Markel, via Blue Waters, issued a marine insurance policy (the “Policy”) to Díaz–Santiago in his name based on the information he had provided. Notably, one of Díaz–Santiago's submitted materials stated that he was the specific owner of the Black Sea, and not MDS, as was actually stated in the vessel purchase materials.

In early March 2009, the Black Sea and its owners entered rough waters. The U.S. Customs and Border Protection (“CBP”) seized the vessel as part of a drug enforcement action.2 The search and seizure of the vessel caused it to suffer a series of damages, significantly decreasing its estimated value. 3 On April 7, 2009, the CBP notified FirstBank of the vessel's seizure and advised FirstBank of its rights pertaining to the ship.

FirstBank, seeking to protect its interest in the vessel, took action to secure the Black Sea's release. Specifically, it initiated an administrative forfeiture proceeding before the CBP; it also intervened in the subsequent criminal case and obtained a voluntary dismissal of the indictment against the vessel.4 It then submitted a claim to Markel on July 1, 2009 requesting payment under the Policy for “the loss of the vessel including, without limitation, the value of the Bank's collateral, legal fees incurred in attempting to secure its release, as well as any applicable costs and interests.” After investigating the claim, Markel denied it on July 9, 2009, offering two grounds for its denial of FirstBank's payment request.

First, it asserted that the Policy was void ab initio because Díaz–Santiago had made material misrepresentations during the marine insurance application process, i.e., he declared himself as the owner of the vessel, when in fact all paperwork concerning the Black Sea's purchase identified MDS as the insured vessel's owner. Second, Markel noted that the Policy's “Use of Your Yacht” provision specifically prohibited the insured yacht's usage for illegal purposes. That same day, Markel notified Díaz–Santiago that the Policy had been declared null and void and issued him a premiums refund check.

Sailing was hardly smooth for the parties thereafter. On July 15, 2009, Markel filed a Complaint for declaratory judgment against Díaz–Santiago and FirstBank, seeking a determination that the Policy was void due to Díaz–Santiago's misrepresentation or, alternatively, that the Policy did not provide coverage to either Díaz–Santiago or FirstBank for the alleged losses resulting from the vessel's seizure. On September 28, 2009, FirstBank filed its Answer and Counterclaim against Markel; filed a Crossclaim against Díaz–Santiago; and filed a Third Party Complaint against, among others, Blue Waters and Díaz–Santiago's wife. On October 9, 2009, FirstBank filed an Amended Third Party Complaint, bringing MDS on board the action.

A series of dispositive motions soon followed—including Markel's October 23, 2009 motion for summary judgment against Díaz–Santiago and FirstBank, and FirstBank's December 4, 2009 opposition motion and cross-motion for summary judgment—with FirstBank and Markel predominantly contesting the validity of the Policy. Following this flurry of filings, Markel and Díaz–Santiago filed a Joint Motion for Entry of Judgment by Consent (the Consent Motion) on March 26, 2010, with Díaz–Santiago, in effect, authoring and signing his own demise in this action.

In the Consent Motion, the parties stated “that the information regarding the identity of the owner of the vessel was a material fact that should have been disclosed to Markel.” The parties further sought entry of judgment for Markel, “declaring that the [Policy] was null and void and does not provide coverage for the damages and/or losses related to the [March 2009] seizure of the [vessel] by [CBP].” On April 9, 2010 the district court granted the motion pursuant to its terms.

FirstBank acted swiftly. Also on April 9, it moved for partial summary judgment against Díaz–Santiago, his wife, and MDS (the April 9 motion”). FirstBank claimed that Díaz–Santiago's admission that the governing insurance policy was null and void due to his misrepresentation or concealment of material facts to Markel— i.e., identifying himself as the owner of the vessel, and not MDS—constituted a breach by MDS of its Preferred Ship Mortgage with FirstBank, which specifically required MDS to “fully and adequately” insure the vessel and to cover all “advances and expenditures” that FirstBank incurred in defending suits related to the Mortgage and promissory note. Díaz–Santiago failed to file an opposition motion to FirstBank's April 9 motion, and so, on May 4, 2010, FirstBank moved for the district court to treat that motion as unopposed.5

That same day, Díaz–Santiago moved to strike FirstBank's April 9 motion for partial summary judgment on the grounds that it did not comply with Local Rule 56 because it did not contain “a separate, short, and concise statement of material facts.” D.P.R. Civ. R. 56. Specifically, Díaz–Santiago challenged FirstBank's decision to incorporate by reference the parties' statements of uncontested material facts that already were on the record from the various motions and cross-motions for summary judgment previously filed in the case, rather than file a separate statement of uncontested facts with the April 9 motion.6 Díaz–Santiago also moved for a protective order, requesting that he not “be forced to oppose an [sic] non-compliant motion for summary judgment until Fistbank [sic] files an amended motion complying with Local Rule 56(a) and (b).” On June 14, 2010, the district court issued an order (the June 14 order”) denying Díaz–Santiago's motions.

On September 30, the district court granted FirstBank's April 9 motion for partial summary judgment and awarded FirstBank $74,512.50 in attorneys' fees for costs and expenses incurred in securing release of the vessel and defending the validity of the Policy (referred to hereinafter as the September 30 order”). Díaz–Santiago subsequently filed a Rule 59 motion to either alter or amend the court's order, set aside its judgment, or reconsider its opinion. The court denied Díaz–Santiago's motion on November 30, 2010 (the November 30 order). This appeal followed, with Díaz–Santiago challenging the district court's (1) denial of his motion to strike and/or motion for protective order, (2) grant of summary judgment in favor of FirstBank, and (3) denial of his motion to alter or set aside the grant of summary judgment to FirstBank.

II. Discussion
A. Denial of Motion to Strike and/or Motion for Protective Order

FirstBank contends, first, that ...

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