Myers v. Fidelity & Cas. Co. of New York

• Decision Date: 10 May 1985
• Docket Number: No. 83-8898,83-8898
• Citation: 759 F.2d 1542
• Parties: Marcelle MYERS, C.I.T. Corporation, Plaintiffs-Appellees, v. The FIDELITY & CASUALTY COMPANY OF NEW YORK, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1542

759 F.2d 1542

Marcelle MYERS, C.I.T. Corporation, Plaintiffs-Appellees, v. The FIDELITY & CASUALTY COMPANY OF NEW YORK, Defendant-Appellant.

No. 83-8898.

United States Court of Appeals, Eleventh Circuit.

May 10, 1985.

Lamar C. Walter, Savannah, Ga., for defendant-appellant.

George L. Hudspeth, Jacksonville, Fla., for C.I.T.

Appeal from the United States District Court for the Southern District of Florida.

Before RONEY and CLARK, Circuit Judges, and SIMPSON, Senior Circuit Judge.

CLARK, Circuit Judge:

This appeal, which is brought by the Fidelity & Casualty Company of New York (Fidelity), arises from the grant of C.I.T. Corporation's (CIT) motion for summary judgment on a counterclaim asserted by Fidelity. Fidelity had sought restitution of $205,000.00 it had previously paid CIT as the result of the loss at sea of a vessel insured by Fidelity on which CIT held a mortgage.

In 1980, Marcelle Myers negotiated the purchase of a shrimp boat called the "Miss Vicki" from Nat Wilson assuming payment of a first preferred ship mortgage and a negotiable promissory note from Wilson to CIT. Article I of the first preferred ship mortgage contained the following covenant:

Owner shall at its own expense, keep the vessel fully and adequately insured under usual full marine insurance.... All insurance shall be taken out in the name of Owner and shall by its terms be payable to Mortgagee for account of Mortgagee and Owner as their respective interests may appear, and all policy forms, ... shall be subject to Mortgagee's approval.... Owner shall maintain all such insurance unimpaired by any act, breach of warranty or otherwise....

Record, Vol. II at 212. On September 2, 1980 in a transfer agreement, CIT consented to the sale of the "Miss Vicki" to Myers upon "the express agreement that said Transferor remain liable on the Contract and any note ... and that said Transferee assume said obligations...." Record, Vol. II at 219. The sale from Wilson to Myers was then consummated.

Until June 22, 1981 the shrimp boat was insured with the Stonewall Insurance Company. Because the policy was due to lapse, Kevin Pacetti, CIT's senior credit analyst, called Myers. Myers directed Pacetti to the Flem Hall Insurance Agency, which Pacetti contacted on June 4, 1981. On June 18, 1981 Pacetti received a letter from the agency which advised that the policy would be renewed. ¹

Myers telephoned Pacetti on June 22, 1981. ² The following note, written by Pacetti to the file, reflects their conversation:

Mr. Myers called this morning. Said he had intended to be able to send us $5,000.00, but the boat apparently ran aground, and the seam near the keel was leaking water, and he had to have it hauled out and repaired. Therefore, he said he would put a check in the mail today for $2,500.00. Hopefully, he will have something by the first of next week to send us. This will bring him current through January and a partial payment on February.

I told him we needed to inspect the boat, therefore we needed a location. He said he didn't know if the boat would be coming back into Tampa or Apalachicola, but when it came in he would give us a call.

Record, Vol. II at 278. The former Stonewall policy, was not renewed but instead a new policy with Fidelity was issued. It became effective at noon on the same day that Pacetti received the telephone call from Myers regarding the condition of the The "Miss Vicki" sank in August, 1981 and CIT suffered a total loss of security. Counsel for CIT requested payment from Fidelity to the extent of its financial interest in the vessel. ³ On August 28, 1981, Scott Bowers, who was a senior claims adjuster at Fidelity, sent a letter which provided in part:

"Miss Vicki". CIT received the new policy at an undetermined date after June 22, 1981. Under the policy, Marcelle Myers was the named assured and CIT was the loss payee. As part of CIT's routine financing policies, Pacetti viewed the Miss Vicki on July 24, 1981 and found the vessel in good condition insofar as he could determine (Record, Vol. II at 270).

We are, at this point in time, carrying out a full investigation into the sinking of F/V "MISS VICKI". After the completion of this investigation, our position as to payment will be forwarded.

Record, Vol. II at 202.

On February 9, 1982, Scott Bowers sent the following letter:

Enclosed please find our settlement check in regard to the above. This check represents full and final payment for any claims under the Breach of Warranty coverage.

You will note that our liability is limited to the financial interest of C.I.T. at the time of the loss, however, not in excess of $205,000.00, thus, our check for that amount (see the attached copy of endorsement No. 3).

We have closed our file in thie [sic] regard.

Record, Vol. II at 199.

Upon receiving payment from Fidelity, CIT sued Nat Wilson and Myers and secured a deficiency judgment against both for the balance of the note after the application of the $205,000.00 insurance payment. Myers paid CIT and the judgment was satisfied. Fidelity had knowledge of this suit and subsequent judgment.

After CIT obtained its judgment, Myers sued Fidelity for the difference between the face amount of the policy and the amount paid to CIT. During the first trial, which ended in a mistrial, Fidelity moved to join CIT claiming that "C.I.T. breached its duty to disclose the damaged keel (unseaworthiness of the vessel), a fact material to the risks, thus voiding the policy." Fidelity sought to recover the $205,000.00 previously paid to CIT. Myers v. The Fidelity & Casualty Company of New York, No. 282-109, slip op. at 3 (Dec. 6, 1983) [hereinafter cited as Dist.Ct.Op.]. The second trial, which started ten days after the first, ended in a verdict for Fidelity and against Myers. The jury did not render a verdict on Fidelity's counter-claim against Myers. The counter-claim against CIT was not at issue and was not submitted to the jury.

In granting CIT's motion for summary judgment, the court was persuaded by two factors. First, it found that "C.I.T. made no representation and was under no duty to report the keel to [Fidelity]." Id. at 4. Second, it found that CIT relied on Fidelity's payment when it satisfied its judgment in full against Myers. Because there were no genuine disputed issues of fact, the court found CIT was entitled to judgment as a matter of law. ⁴

Fidelity contends that the district court erred in granting summary judgment because: (1) as a matter of law, CIT had a duty to report the grounding and keel damage prior to the inception of the policy; and (2) CIT failed to carry its burden of demonstrating the five elements necessary for the application of the doctrine of estoppel. CIT urges this court to affirm the district The issues before us in this appeal are twofold. First, we must decide what duty a mortgagee/loss payee has under a maritime hull insurance policy to inform an insurance company when it is given notice about a problem concerning the vessel. The second issue before us is whether the district court erred in granting summary judgment based on CIT's reliance on Fidelity's payment of the insurance proceeds.

                court's ruling because it did not have a duty to disclose the problems with the "Miss Vicki". 5   CIT also claims that the defense of estoppel was established because it relied on Fidelity's payment and letter when it sued Myers and obtained the deficiency judgment
                

Fidelity takes the position that CIT assumed the same contractual obligations as Myers and that it was required to comply with all terms, conditions and warranties in the policy. ⁶ Fidelity's argument is summarized in the following law review article that considers the mortgagee's position in a hull policy:

The underwriter's obligation to a known mortgagee of a vessel insured under a hull policy is similar to that of the owner, or the named assured. The obligation is created by naming the mortgagee an additional assured and/or including the mortgagee in the loss payable provisions of the hull policy.

Upon being named as additional assured, the mortgagee assumes the same contractual obligations as that of the assured in that he too is responsible for premium payments and must comply with all terms, conditions, and warranties contained in the insuring agreement.

H. Mack, The Hull Policy: Additional Assured; Loss Payees; Waiver of Subrogation; The Mortgagee's Position; Premiums; Deductibles and Franchises, 41 Tul.L.Rev. 381, 385 (1967) (emphasis added) (footnotes omitted). ⁷ Fidelity claims the endorsement that eliminated the warranties under the policy did not eliminate the policy's conditions. Thus, when CIT allegedly concealed the fact regarding the condition of the ship, it breached a condition of the policy which caused the policy to be void from inception.

While we hold that there are facts and circumstances which would create a duty upon a mortgagee to inform an insurance company of facts known to it which are adverse to the risk insured against in the policy, we conclude that under the facts of this case Fidelity is not entitled to recover from CIT for a breach of a condition in the policy. Further, we hold that this is not a case involving estoppel, but involves the law of restitution and that under the facts Fidelity is not entitled to recover from CIT for its mistaken payment to CIT.

CIT did not "conceal or misrepresent in writing or otherwise any material facts or circumstances" from Fidelity. On June 18th it had received a letter from Fidelity's agent that a policy on the "Miss Vicki" would be renewed as of June 22nd. The telephone call from Myers that morning before the noon inception of the new policy that the vessel had apparently "run aground" and was taking water did not require that Pacetti call Fidelity's agent and relay the information. Myers' call indicated the boat would be coming into Tampa or Apalachicola. First, Pacetti could not make a judgment based on...