Command Transp. Inc. v. B.J.'s Wholesale Club Inc.
| Decision Date | 03 March 1995 |
| Docket Number | No. 94-1853,94-1853 |
| Citation | 62 F.3d 18 |
| Parties | Fed. Carr. Cas. P 83,978 COMMAND TRANSPORTATION INC., Plaintiff-Appellee, v. B.J.'S WHOLESALE CLUB INC., Ames Department Stores Inc., Morse Shoe Inc., Lionel Leisure Inc., and Home Insurance Company, Defendants-Appellees, Liberty Mutual Insurance Company, Defendant-Appellant. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
David J. Daly, with whom John E. Lecomte, Timothy J. Daly and Lecomte, Emanuelson, Tick & Doyle, Boston, MA, were on brief for appellant Liberty Mut. Ins. Co.
Kurt Terwilliger, with whom Richard D. Bickelman and Deutsch Williams Brooks DeRensis Holland & Drachman, Boston, MA, were on brief for appellee Command Transp., Inc.
Before BOUDIN, Circuit Judge, JOHN R. GIBSON * and CAMPBELL, Senior Circuit Judges.
Liberty Mutual Insurance Company appeals from the district court's judgment denying its counterclaims against Command Transportation, Inc. to recover freight damage claims Liberty paid to Command's shippers and to collect insurance premiums from Command. Liberty argues that the district court erred: (1) in failing to reduce freight damage claims Liberty paid Command's shipping customers by the amounts the shippers owed Command for freight services; (2) in denying its motions to substitute or add the Resolution Trust Corporation as a defendant or third-party defendant; (3) in denying relief on Liberty's breach of contract claim against Command for unpaid insurance premiums; and (4) in ruling on issues of disputed material fact. We affirm the district court's judgment.
It is unnecessary that we detail the complex facts underlying the relatively simple issues in this appeal. This litigation began when Command, an interstate trucking company, became insolvent and attempted to collect freight charges from its shippers, including B.J.'s Wholesale Club, Inc.; Lionel Leisure, Inc.; Morse Shoe, Inc.; and Ames Department Stores. These shippers filed counterclaims against Command for freight damage and losses.
In 1980, Command had purchased a Motor Truck Cargo Policy from Liberty. As required by the Interstate Commerce Act, the policy contained an endorsement for cargo liability, commonly referred to as a "BMC -32 endorsement." 49 U.S.C. Sec. 10927(a)(3)(1988). Under the BMC-32 endorsement Liberty was required to pay directly any freight damage claims of Command's shippers for which Command may have been liable. Further, the BMC-32 endorsement provided, in part:
The insured agrees to reimburse [Liberty] for any payment made by [Liberty] on account of any loss or damage involving a breach of the terms of the policy and for any payment that [Liberty] would not have been obligated to make under the provisions of the policy, except for the agreement contained in this endorsement.
The policy terminated on October 1, 1988, and was replaced by a similar policy issued by Home Insurance Company. Command sued Liberty and Home for breaching the insurance contract by failing to pay shippers directly for their lost or damaged freight. Although Liberty admittedly received the freight claims (and, in fact, paid some), Liberty argued that it was entitled to Command's accounts receivable from the shippers. Liberty alleged that a surety relationship existed between Command and Liberty by virtue of Liberty's payment of freight damage claims directly to the shippers under the BMC-32 endorsement. As surety of an insolvent principal, Liberty contended that it could set off Command's freight charge claims against Liberty's obligation to pay the shippers' freight damage claims.
In 1986, Command entered into a revolving finance agreement with Comfed Savings Bank. The agreement granted Comfed a security interest in certain of Command's assets, including Command's accounts receivable.
By April 1989, Command was insolvent. Command sold its assets to Munson Transportation and paid the proceeds to Comfed. In December 1990, the RTC was named as conservator for Comfed, and, in September 1991, the RTC was appointed receiver. Liberty claimed that the RTC was the real party in interest which must be substituted for Command or added as a third-party defendant.
During the litigation, the district court denied Liberty's motions to substitute the RTC for Command or to add the RTC as a third-party defendant. The court rejected Liberty's arguments that the RTC, through Comfed, was the real party in interest.
Ultimately, the parties resolved all their respective claims, except for Liberty's counterclaims against Command for setoff and for breach of contract.
The district court ordered that Command and Liberty file an agreed stipulation of facts. The parties could not agree to a joint stipulation of facts, so each party submitted its own proposed stipulation of facts. The proposed stipulations were almost identical except each party included some facts that the other party either disagreed with or did not address.
After a hearing on March 28, 1994, the district court denied Liberty's counterclaims. Command Transportation Inc. v. B.J.'s Wholesale Club, Inc., 864 F.Supp. 226, 232 (D.Mass.1994). The court determined that the BMC-32 endorsement obligated Liberty to pay shippers directly for freight damage and loss. The court ruled that although this obligation may supersede other provisions of the insurance policy, "the endorsement must be read in conjunction with, not in lieu of, the policy." Id. at 229. The court based this ruling on the endorsement, which stated: "[A]ll terms, conditions, and limitations in the policy to which this endorsement is attached are to remain in full force and effect." After discussing two cases considering earlier versions of the BMC-32 endorsement, In re Yale Express Sys., Inc., 362 F.2d 111 (2d Cir.1966), and Empire Fire & Marine Ins. Co. v. J. Transport, Inc., 880 F.2d 1291 (11th Cir.1989), the court distinguished obligations arising from the policy and obligations arising from the endorsement. The court concluded that Liberty could be a surety, entitled to a setoff only for payments it made to shippers "solely" under the endorsement, and that Liberty failed to prove that it made payments solely under the endorsement. 864 F.Supp. at 231. The court determined that Liberty failed to classify its payments to shippers as an obligation from the endorsement or as an obligation from the policy. The court pointed out that Liberty omitted the cargo policy as an exhibit to the Stipulation of Facts, and attached only a one-page form: "Motor Truck Policy--Gross Receipts," which did not explain Liberty's obligation to pay claims under the policy. Id. The court ruled that Liberty was not entitled to set off freight damage claims with Command's accounts receivable. The court acknowledged that Liberty could have a valid setoff claim "to the extent that its payments represent deductibles it would not have been obligated to pay under the policy." Id. at 231. Once again, however, the court concluded that Liberty failed to prove entitlement to a setoff. The court referred to an affidavit submitted by Liberty, to which Command did not stipulate, listing Liberty's total payments to each shipper. Id. Because the affidavit showed only total payments, the court could neither determine if Liberty had already reduced the amount by the deductible, nor calculate the date, amount, or number of losses. Accordingly, the court concluded that there was no basis for ruling that Liberty was entitled to a setoff for the deductible amount. Id. at 231-32.
Liberty also claimed subrogation rights arising from indemnity agreements between it and Command, whereby Command agreed to indemnify Liberty for any monies paid by Liberty in connection with "bonds, undertakings and/or obligations of suretyship or guarantee" issued on behalf of Command. Because Liberty's recovery under this provision depended on proving a surety relationship, the court did not address Liberty's claim of subrogation. Id. at 232. The court explained that a further obstacle to Liberty's claims existed because a non-party, the RTC, held a secured interest in Command's accounts receivable. Id. at 232.
Finally, the court held that Liberty failed to prove its breach of contract claim. Id. The court reasoned that the sole item of evidence, a September 20, 1989, Statement of Account, did not prove that Command owed Liberty premiums under the policy that lapsed in 1988. Without the terms of the policy, including proof of coverage dates, the court refused to speculate whether Command had failed to pay premiums due. Id. at 232.
Liberty filed a motion to amend judgment. At a hearing on a different motion, Liberty's counsel stated that he did not expect the court to enter judgment on the basis of stipulated facts but thought there would be a trial. The district court judge found this statement inconsistent with his recollection of the March 28, 1994 proceedings when Liberty's counsel remained silent after Command's counsel stated he expected the court to enter judgment on the basis of the stipulated record. The court construed Liberty's silence as assent. The district court denied Liberty's motion, and Liberty appeals.
In its reply brief, Liberty contends that the parties did not authorize the district court to decide disputed material facts. Liberty asserts that although the parties wanted the district court to decide the case based on stipulated facts, the parties did not agree to stipulated facts. Arguing that the standard governing the granting of a summary judgment motion applies, Liberty contends that the district court erred by ruling on material issues of genuine fact without a trial.
Liberty agreed, however, for the district court to decide the case on the record before it. The first paragraph in Liberty's memorandum submitted to the district court in support of judgment in its favor states:
The following memorandum is submitted pursuant to the...
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