Aetna Life & Cas. Corp. v. Maravich

• Decision Date: 17 July 1987
• Docket Number: No. 86-3757,86-3757
• Citation: 824 F.2d 266
• Parties: AETNA LIFE & CASUALTY CORPORATION, a corporation, and the Standard Fire Insurance Company, a corporation v. David G. MARAVICH and Donna M. Maravich, his wife, and Gene A. Pietragallo d/b/a Interior Services by Pietragallo. Appeal of David G. MARAVICH and Donna M. Maravich, Appellants. . Submitted Under Third Circuit Rule 12(6)
• Court: U.S. Court of Appeals — Third Circuit

Page 266

824 F.2d 266

AETNA LIFE & CASUALTY CORPORATION, a corporation, and the Standard Fire Insurance Company, a corporation v. David G. MARAVICH and Donna M. Maravich, his wife, and Gene A. Pietragallo d/b/a Interior Services by Pietragallo Appeal of David G. MARAVICH and Donna M. Maravich, Appellants.

No. 86-3757.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit Rule 12(6)

July 17, 1987.

Decided July 27, 1987.

Gerard J. Cipriani, Cashman & Cipriani, Pittsburgh, Pa., for appellants, David G. Maravich and Donna M. Maravich.

Paul K. Geer, Jones, Gregg, Creehan & Gerace, Pittsburgh, Pa., for appellees, Aetna Life & Cas. Corp. and The Standard Fire Ins. Co.

William F. Ward, Frank G. Salpietro, Meyer, Unkovic & Scott, Pittsburgh, Pa., for appellee, Gene A. Pietragallo, d/b/a Interior Services by Pietragallo.

Before HIGGINBOTHAM, SLOVITER, and STAPLETON, Circuit Judges.

OPINION OF THE COURT

SLOVITER Circuit Judge.

The issue raised by this appeal is whether an innocent wife who receives one-half of the fire insurance covering a residence held as a tenancy by the entireties which was damaged by a fire set by her husband must repay in full the cost of repairs to the property.

I. Facts

In a state court proceeding brought by David and Donna Maravich for the proceeds of the insurance policy covering their residence, it was established that on February 19, 1982, a fire occurred causing damage to both the building and its contents. The Maraviches filed a claim with Aetna Life & Casualty Corp. and its subsidiary, The Standard Fire Insurance Co. (hereafter jointly "Aetna"), pursuant to their insurance policy. The jury rejected David Maravich's story that the fire was set by intruders, instead concluded that David Maravich had set the fire, and entered a verdict for Aetna. The trial court found that there was no evidence implicating Donna Maravich in the arson and entered judgment n.o.v. awarding Donna Maravich the amount of $31,550, one-half of the insurance proceeds. The judgment was affirmed by the Superior Court of Pennsylvania. See Maravich v. Aetna Life & Casualty Co., 350 Pa. Super. 392, 504 A.2d 896 (1986).

The Maravich residence had been repaired by a contractor, Gene A. Pietragallo, d/b/a Interior Services by Pietragallo, who, prior to the state court proceeding, had been hired by Aetna pursuant to authorization by the Maraviches. When no party paid his claim, Pietragallo filed suit against Aetna and the Maraviches in the Court of Common Pleas of Allegheny County, seeking reimbursement in the amount of $22,474.25, plus interest, for the cost of materials and services provided to repair the Maravich home.

Shortly thereafter, Aetna filed this diversity action in the United States District Court for the Western District of Pennsylvania against Pietragallo and the Maraviches for interpleader pursuant to Rule 22 of the Federal Rules of Civil Procedure and for declaratory relief, alleging potential exposure to multiple claims to a limited fund. In addition to seeking to have the Maraviches and Pietragallo litigate in this action their respective rights to monies due under the insurance policy, Aetna sought to enjoin Donna Maravich from executing judgment against the fund and to prevent Pietragallo from proceeding with his state lawsuit. Pietragallo filed a counterclaim against Aetna and a cross-claim against the Maraviches seeking $22,475.25 plus interest in compensation for services and materials provided to the repair of the Maravich house. The Maraviches conceded that Pietragallo was entitled to one-half of his claim, $11,237.13, from Donna Maravich's share of the insurance proceeds.

The Maraviches and Pietragallo filed cross-motions for summary judgment. The district court rejected Donna Maravich's contention that she was not responsible for payment of Pietragallo's entire claim and thus granted Pietragallo's motion for summary judgment awarding him judgment for the entire amount of his claim, $22,474.25 plus interest, from the fund held by Aetna, with the remainder of the fund going to Donna Maravich. Donna Maravich appeals. ¹

It is not disputed that Aetna provided the Maraviches with a list of contractors, including Pietragallo, who were experienced in fire damage repairs; that at Aetna's request, Pietragallo provided an estimate as to the cost of repairing the structural damages caused by the fire, and his proposal was accepted by Aetna; that David Maravich orally and in writing authorized Pietragallo to proceed with the repairs; and that the work was done and that the amount of the claim is reasonable. In granting summary judgment, the district court held that Donna Maravich would be unjustly enriched if allowed to collect the proceeds of the insurance policy from Aetna without reimbursing Pietragallo for his services. Further, the court construed the written work authorization signed by David Maravich as an agreement between the Maraviches and Pietragallo that he would be paid out of the insurance proceeds.

Our scope of review of the district court's grant of summary judgment is plenary. See E.E.O.C. v. Great Atlantic & Pacific Tea Co., 735 F.2d 69, 81 (3d Cir.), cert. dismissed, 469 U.S. 925, 105 S.Ct. 307, 83 L.Ed.2d 241 (1984).

II. Discussion

In arguing that the district court erred in granting defendant Pietragallo's motion for summary judgment, Donna Maravich contends that the district court was estopped by the prior Pennsylvania Superior Court decision from holding her fully responsible for the entireties' debt to Pietragallo. She argues that the Pennsylvania Superior Court decision represents a binding determination that she has only a half interest in both the assets and obligations of the entireties and that therefore she can be liable only for half the repair costs incurred by the entireties.

As a federal court sitting in diversity, we must apply substantive state law. See Van Buskirk v. Carey Canadian Mines, Ltd., 760 F.2d 481, 487 (3d Cir.1985). Under the applicable Pennsylvania law a party must show four elements in order to raise a successful claim of collateral estoppel: (1) that the identical issue has been decided in a prior action; (2) that there has been a final judgment on the merits; (3) that the party against whom estoppel is asserted was a party, or in privity with a party, to the prior adjudication; and (4) that the party against whom estoppel is asserted had a full and fair opportunity to litigate the issue in question in the prior action. Safeguard Mutual Insurance Co. v. Williams, 463 Pa. 567, 574, 345 A.2d 664, 668 (1975). Further, the determination of the issue must have been essential to the outcome of the prior action. Koshatka v. Philadelphia Newspapers, Inc., 762 F.2d 329, 337 (3d Cir.1985). At least two of the essential elements of estoppel are not satisfied in this case.

In the first place, the Pennsylvania Superior Court did not rule on Donna Maravich's obligation to pay for repairs to the entireties' property, the issue before us. Instead, the issue it focused upon was "whether an innocent co-insured will be allowed to recover on a fire insurance policy after another co-insured has intentionally burned the insured property," which, under Pennsylvania law, "depends on whether the interests of the co-insureds are joint or severable." Maravich v. Aetna Life & Casualty Co., 350 Pa. Super. 392, 403, 504 A.2d 896, 902 (1986). That "is determined by the terms of the policy and not the ownership of the underlying insured asset." Bryant v. Girard Bank, 358 Pa. Super. 335, 353, 517 A.2d 968, 978 (1986); Maravich, 350 Pa. Super. at 403-11, 504 A.2d at 902-06; McDivitt v. Pymatuning Mutual Fire Insurance Co., 303 Pa.Super. 130, 135-36, 449 A.2d 612, 615 (1982); Opat v. State Farm Fire & Casualty Insurance Co., 542 F.Supp. 1321, 1324-27 (W.D.Pa.1982), aff'd, 755 F.2d 922 (3d Cir.1984).

The Pennsylvania Superior Court followed this rule. It found that Donna Maravich was entitled to indemnification because, under the insurance contract, (1) the parties' insurable interests were severable; and (2) the policy's exclusionary language did not bar coverage for an innocent spouse where the property was intentionally damaged by the other. Maravich, 350 Pa. Super. at 410-11, 504 A.2d at 905-06. Thus, the Superior Court did not decide, as Maravich claims, that she holds a severable half interest in property formerly held by the entireties.

In the second place, Pietragallo was not a party to the Superior Court action, but merely a witness. Nor could he be considered to be in privity with any party, since "privity" is a term of art reserved for specifically defined relationships. Accordingly, the decision in the Superior Court case was not binding here and the district...