East Park, Inc. v. Federal Ins. Co.

• Decision Date: 23 July 1986
• Docket Number: No. 85-8794,85-8794
• Citation: 794 F.2d 616
• Parties: EAST PARK, INC., Shorty's Famous Steakhouse, Inc., and Virginia Cribb, Individually and d/b/a Shorty's Steakhouse, Plaintiffs-Appellees, v. FEDERAL INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 616

794 F.2d 616

EAST PARK, INC., Shorty's Famous Steakhouse, Inc., and

Virginia Cribb, Individually and d/b/a Shorty's

Steakhouse, Plaintiffs-Appellees, v. FEDERAL INSURANCE COMPANY, Defendant-Appellant.

No. 85-8794.

United States Court of Appeals, Eleventh Circuit.

July 23, 1986.

Clayton H. Farnham, Richard K. O'Donnell, Atlanta, Ga., for Federal ins. co.

William P. Langdale, Jr., Valdosta, Ga., for Shorty's.

John F. Daugherty, Atlanta, Ga., for East Park.

Appeal from the United States District Court for the Middle District of Georgia.

Before RONEY and CLARK, Circuit Judges, and GIBSON ^*, Senior Circuit Judge.

FLOYD R. GIBSON, Senior Circuit Judge:

Federal Insurance Company ("Federal") appeals from the district court's grant of summary judgment to plaintiffs East Park, Inc. and Shorty's Famous Steakhouse, Inc. ("Shorty's"). East Park and Shorty's brought suit to recover insurance proceeds for fire damage to Shorty's Famous Steakhouse, a restaurant owned by them and located on Madison Highway, south of Valdosta, Georgia. We reverse the grant of summary judgment and remand for further proceedings consistent with this opinion.

I. FACTS

Fire broke out in Shorty's Steakhouse in the early morning hours of January 1, 1983. Before the building was completely destroyed, a deputy sheriff who was first to arrive at the scene checked all of the doors and windows of the building and found that all of the doors were locked and that none of the windows were of a type that could be opened. Further, the deputy looked for but discovered no evidence of forced entry. After the fire units arrived at the building, the deputy and a detective found plastic buckets containing green fuel and linked together with fuel-soaked cotton string. Only one of the buckets could be removed before an explosion occurred, which ultimately rendered the building a total loss.

Federal, which had issued a fire insurance policy to East Park and Shorty's on the building that had burned and its contents, hired a fire reconstruction expert to determine the cause and origin of the fire. The expert, Mr. Don Dowling of Kennedy & Kennedy, Inc., determined that the buckets--five in all--found by the deputy and the detective at the time of the fire were the source of the fire. The buckets had been filled with flammable liquid, placed to span the length of the insured premises, and connected by cotton string trailers. From his investigation Dowling concluded not only that the fire was of incendiary origin, but that judging from the effort put into setting up the buckets and trailers, the fire was a well-planned, thorough, and professional attempt to destroy the entire premises. Dowling further concluded that the arsonist gained entrance to the building with a key.

Following the fire, Mr. Segars opened a new Shorty's Steakhouse on North Valdosta Road in North Valdosta. When Federal failed to pay the proceeds under the policy on the burned building, East Park, Shorty's, and Virginia Cribb (individually and d/b/a Shorty's Steakhouse) brought this suit in state court in 1983. The case was removed to federal court and ultimately transferred to the United States District Court for the Middle District of Georgia. The plaintiffs sought the insurance proceeds as well as damages for bad faith and defamation. Cribb also sought to have the policy reformed to include her as a named insured. In its answer Federal raised as a defense to liability under the policy that the plaintiffs or someone on their behalf had intentionally burned the insured property.

Following discovery, all three plaintiffs filed a motion for partial summary judgment on the issue of Federal's liability for the damage to the real property. The district court granted the motion, holding that the facts did not establish all the elements of arson. The district court denied Cribb's separate motion for partial summary judgment on the reformation issue, and also ruled that plaintiffs had abandoned their defamation claims.

The case was set for jury trial for the week of June 3, 1985 on the remaining issues of the amount of loss, ownership of the personal property destroyed in the fire, Federal's alleged bad faith, and attorneys' fees. At a pretrial conference on May 29, 1985, the parties reached a final settlement as to the personal property claims and a conditional settlement as to all other claims. The district court entered an order on September 10, 1985, ostensibly setting out those settlements. In the order the court dismissed with prejudice all claims as to personal property on behalf of all the plaintiffs. Finding that all of Virginia Cribb's claims had thus been resolved, the court also dismissed her claims with prejudice. The court stated that the rest of the settlement agreement was contingent on this court's action in this appeal. If this court were to affirm the district court's summary judgment order on the liability issue, all issues except attorneys' fees on appeal would be settled. If, however, this court were to reverse the grant of summary judgment, the contingent settlement agreement would not take effect and all issues except the personal property claims, which were dismissed with prejudice, would go to trial. The contingent settlement agreement stipulates to the value of the building and the amount of attorneys' fees, and provides for a bad faith penalty against Federal equal to 25% of the amount due under the policy (the maximum penalty allowed under Georgia statute). Also in its September 10th Order the district court entered final judgment on its earlier grant of partial summary judgment on the liability issue, as well as on all personal property claims and all of Virginia Cribb's claims.

Contending that the September 10th Order did not accurately reflect the settlement agreement reached among the parties, Federal filed a motion for relief from final judgment and a motion to modify or vacate the Order. The district court denied both motions on November 6, 1985. Federal now appeals to this court, claiming that the district court erred in granting summary judgment because questions of material fact exist as to Federal's arson defense. Federal further argues that if this court does not reverse the grant of summary judgment, the September 10th Order should be modified or vacated because it inaccurately states the stipulations made by the parties in the contingent settlement agreement.

II. DISCUSSION

In reviewing a decision granting or denying summary judgment, this court applies the same standards used by the district court to determine whether summary judgment is appropriate in a given case. Mercantile Bank & Trust Co. v. Fidelity Deposit Co., 750 F.2d 838, 841 (11th Cir.1985); Thrasher v. State Farm Fire & Casualty Co., 734 F.2d 637, 638 (11th Cir.1984). The moving party bears the burden of demonstrating that no genuine dispute exists as to any material fact in the case. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Mercantile Bank & Trust, 750 F.2d at 841. When determining whether a movant has met its burden, the courts review the evidence and all factual inferences therefrom in the light most favorable to the non-moving party. Adickes, 398 U.S. at 157, 90 S.Ct. at 1608; Mercantile Bank & Trust, 750 F.2d at 841. Any reasonable doubt about the facts is also resolved in favor of the non-moving party. Mercantile Bank & Trust, 750 F.2d at 841.

The Georgia Supreme Court appears never to have reached the question of what constitutes a prima facie case of arson for the purpose of denying coverage under a fire policy. In two fairly recent Georgia Court of Appeals decisions that court developed two slightly varying formulas establishing the elements of an arson defense. In Fortson v. Cotton States Mutual Insurance Co., 168 Ga.App. 155, 157, 308 S.E.2d 382, 385 (1983), the court held that an insurance company asserting an arson defense must show that: (1) the fire was of incendiary origin; (2) the insured had the motive to have the fire set; and (3) the insured had the opportunity to have the fire set. Four months later in Southern Trust Insurance Co. v. Braner, 169 Ga.App. 567, 568, 314 S.E.2d 241, 243 (1984), the court listed as the elements of arson: (1) incendiarism by someone; (2) motive by the suspect; and (3) unexplained surrounding circumstantial evidence implicating the suspect. In Forbus v. Allstate Insurance Co., ...