Filed: Apr. 11, 2000
Latest Update: Mar. 02, 2020
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ m 99-60563 Summary Calendar _ ST. PAUL FIRE & MARINE INSURANCE COMPANY, Plaintiff-Appellee, VERSUS STATE VOLUNTEER MUTUAL INSURANCE COMPANY, Defendant-Appellant. _ Appeal from the United States District Court for the Northern District of Mississippi (2:97-CV-47) _ April 5, 2000 Before SMITH, BARKSDALE, and an insured who had been, at the relevant time, PARKER, Circuit Judges. putatively covered by both companies. State Volunteer claim
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ m 99-60563 Summary Calendar _ ST. PAUL FIRE & MARINE INSURANCE COMPANY, Plaintiff-Appellee, VERSUS STATE VOLUNTEER MUTUAL INSURANCE COMPANY, Defendant-Appellant. _ Appeal from the United States District Court for the Northern District of Mississippi (2:97-CV-47) _ April 5, 2000 Before SMITH, BARKSDALE, and an insured who had been, at the relevant time, PARKER, Circuit Judges. putatively covered by both companies. State Volunteer claims..
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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 99-60563
Summary Calendar
_______________
ST. PAUL FIRE & MARINE INSURANCE COMPANY,
Plaintiff-Appellee,
VERSUS
STATE VOLUNTEER MUTUAL INSURANCE COMPANY,
Defendant-Appellant.
_________________________
Appeal from the United States District Court
for the Northern District of Mississippi
(2:97-CV-47)
_________________________
April 5, 2000
Before SMITH, BARKSDALE, and an insured who had been, at the relevant time,
PARKER, Circuit Judges. putatively covered by both companies. State
Volunteer claims that the district court lacked
JERRY E. SMITH, Circuit Judge:* jurisdiction and erred in its application of
Mississippi's parol evidence rule and doctrine
State Volunteer Mutual Insurance of equitable subrogation. Finding no
Company (“State Volunteer”) appeals a reversible error, we affirm.
summary judgment directing it to share liability
with St. Paul Fire & Marine Insurance I.
Company (“St. Paul”) for a claim made against Lance Whaley is an obstetrician and
gynecologist who contracted with St. Paul for
the purchase of medical malpractice insurance.
*
He contracted with State Volunteer for
Pursuant to 5TH CIR. R. 47.5, the court has liability insurance, effective January 1,
determined that this opinion should not be retroactive to 1986.
published and is not precedent except under the
limited circumstances set forth in 5TH CIR. R. Whaley delivered an infant named Morgan
47.5.4.
Fletcher. After complications arose as a part St. Paul in the position of a party to the
of the delivery process, an attorney liability insurance contract between Whaley
representing Morgan and the Fletcher family and State Volunteer, and that under
requested hospital records relevant to Mississippi contract law, State Volunteer
Whaley’s delivery of Morgan, and soon should be held liable for half of the paid
thereafter requested that Whaley put his Fletcher claim.
insurance carrier on notice of a claim by the
Fletchers. Fletcher informed St. Paul of the II.
request for information and informed both St. Paul’s contract with Whaley included a
insurers of the demand letter. subrogation clause stating that
State Volunteer suggested to Whaley that [a]ny person protected under this policy
he take up the matter with St. Paul. St. Paul, may be able to recover all or part of a
not aware of the State Volunteer contract or loss from someone other than us.
the contact between Whaley and State Because of this, each protected person
Volunteer, undertook a defense of Whaley and must do all that’s possible after a loss to
ultimately settled the claims. preserve any right of recovery available.
If we make a payment under this policy
After the settlement checks had been that right of recovery will belong to us.
issued, but before consummation of the If we recover more than we’re paid, the
settlement, St. Paul discovered the existence of excess will belong to the person who
Whaley’s policy of insurance with State had the loss. But we’ll deduct our
Volunteer. St. Paul promptly contacted State recovery expenses first.
Volunteer and requested contribution from
State Volunteer of one-half of the settlement Under less complex circumstances, this
amount and the cost of defense. clause, by itself, would have provided St. Paul
contractual subrogation to the position of
State Volunteer declined. It argued, and Whaley as against State Volunteer. State
Whaley agreed in affidavit testimony to the Volunteer’s contract with Whaley, though,
district court, that it had been informed of the contains an anti-assignment clause, declaring
pending Fletcher litigation when it negotiated that “[a]ssignment of interest under this policy
coverage with Whaley, but had specifically and shall not bind the Company until its consent is
explicitly agreed with Whaley to exclude the endorsed hereon.” The district court
Fletcher incident from its coverage. Neither considered the possibility, without explicitly
Whaley nor State Volunteer, however, could deciding the issue, that State Volunteer’s anti-
provide the court with a contract or an assignment clause invalidated St. Paul's
addendum thereto that memorialized this subrogation clause.
agreement.1
We assume arguendo that the anti-
The district court held that St. Paul had assignment clause does defeat contractual
been subrogated to the rights of Whaley by the subrogation. We then, like the district court,
doctrine of equitable subrogation, that this put look to the possibility of equitable
subrogation.
1 The equitable doctrine of subrogation
State Volunteer notes in its brief that its applies whenever any person, other than
“policy is not part of the Record on Appeal, but
counsel will be taking steps to provide a[] policy to a mere volunteer, pays a debt or demand
assist the Court in its determination.” It did not. which in equity and good conscience
We can only assume, therefore, that the should have been paid by another, or
“specimen” policy included in the appellate record where one finds it necessary for his own
replicates the written contract which bound Whaley protection to pay the debt for which
and State Volunteer. another is liable.
2
First Nat’l Bank v. Huff, 441 So. 2d 1317, the Fletchers toward the eventual settlement.
1319 (Miss. 1983). The district court, in its
discretion, found equitable subrogation to With regard to the issue of parol evidence,
apply in this instance. State Volunteer does successfully direct this
court to an error by the district court. In
We agree. In First National, a bank had Mississippi, t he parol evidence rule limits the
erroneously canceled a deed of trust between introduction of extrinsic evidence to elucidate
two of its customers. Eventually, following the real meaning of a contract only when the
the debtor’s death, the debtor’s estate stopped parties to the dispute are also the parties to the
paying on the deed in response to the fact that contract.
the creditor had not filed with the estate. The
bank was obliged to pay the creditor, but then The parol evidence rule provides that
wished to collect that payment from the when the language of a contract is clear
debtor. The courts of Mississippi allowed and unambiguous, parol testimony is
collection under the equitable subrogation inadmissible to contradict the written
doctrine. See id. at 1317-20. language. However, more importantly,
this Court has also held that this Court
The facts here are similar. St. Paul took has adopted the general rule that the
responsibility for Whaley’s liability under the parol evidence rule applies only to
insurance contract, finding out only at the end controversies between parties to the
of the settlement process that State Volunteer agreement. In the case sub judice, the
might also be responsible for the liability. “agreement” in question is the insurance
Whaley had granted St. Paul the right to stand policy, and the insurance company is not
in Whaley’s shoes in any circumstances in a party in this controversy. Therefore,
which another party might be wholly or partly this Court holds that the evidence
liable for payments made by St. Paul on received by the Court was properly
Whaley’s behalf, and Whaley had promised to admitted and properly considered.
“do all that’s possible after a loss to preserve
any right of recovery.” Sullivan v. Estate of J.C. Eason (In re Eason),
558 So. 2d 830, 832 (Miss. 1990) (citing
Hence, Whaley was in good faith bound to Smith v. Falke,
474 So. 2d 1044, 1046 (Miss.
St. Paul to attempt to collect from State 1985)) (internal quotation marks omitted).
Volunteer, and St. Paul should in equity have
recovered half of its expenditure in the This passage illustrates the error of the
Fletcher case. While the anti-assignment term district court’s assertion that parol evidence is
may have defeated that right at law, the district not admissible when a non-party to the
court did not abuse its discretion by contract wishes an interpretation of the
determining that equity requires that St. Paul contract unless the contract is ambiguous.
be placed in Whaley’s shoes in order to collect Rather, in Mississippi, the parol evidence rule
from State Volunteer. functions only when the parties to a contract
seek interpretation thereof, and then only when
III. that contract is unambiguous on its face.
State Volunteer states two primary
arguments against this understanding. First, it The error is of no help to State Volunteer,
contends that the district court erred in failing however. As we have said, St. Paul, by the
to consider its proffered parol evidence that efforts of the doctrine of equitable
the insurance contract between Whaley and subrogation, stands in Whaley’s shoes:
State Volunteer had been intended to exclude
any liability for the Fletcher event. Second, it Subrogation has been defined as the
avers that St. Paul should be estopped from substitution of one person in place of
collecting from State Volunteer because it did another, whether as a creditor or as a
not allow State Volunteer to negotiate with possessor of any rightful claim so that he
3
who is substituted succeeds to the rights Volunteer contract until the eleventh hour of
of the ot her in relation to the debt or negotiationSSafter it had already written a
claim, and its rights, remedies, or check to Fletcher. Under these circumstances,
securities. we cannot see that the district court abused its
discretion in denying State Volunteer the
First National, 441 So. 2d at 1319 (internal solace of these equitable defenses.
quotation marks omitted).
AFFIRMED.
For purposes of this litigation, therefore, St.
Paul is no stranger to the contract, but is the
representative of one of the contracting
parties. As a result, State Volunteer may not
enter into the record parol evidence of the
special intent of the parties (here, the intent
not to cover the Fletcher event), because the
contract unambiguously failed even to allude
to such an exception. State Volunteer is
therefore bound by the unambiguous terms of
the contract.
This “stepping into the shoes of” Whaley
also defeats State Volunteer’s argument that
the district court lacked jurisdiction. State
Volunteer argued that because there was no
privity of contract between St. Paul and State
Volunteer, St. Paul had no standing to bring an
action against it. Because subrogation inserts
St. Paul into the position of Whaley, however,
proper contract jurisdiction exists.
State Volunteer also argues that it should
be protected by the doctrine of waiver,
estoppel or laches from application of
equitable subrogation. The district court dealt
with this argument expeditiously but
sufficiently. We simply point out that (1) State
Volunteer enjoyed early notification that the
Fletcher affair was reaching the crisis stage,
and responded by referring Whaley to St.
Paul's without guaranteeing its own lack of
liability or communicating that purported lack
of liability to St. Paul at an early stage of the
affair; (2) State Volunteer is charged with
knowing that it had not manifested in any
writing the understanding with Whaley that the
Fletcher affair would not be covered by the
Whaley/State Volunteer contract; (3) State
Volunteer knew from Whaley’s call as crisis
approached that at least Whaley did not fully
comprehend that State Volunteer had accepted
no responsibility for the Fletcher affair; and
(4) St. Paul did not know of the Whaley/State
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