Crist v. Dickson Welding, Inc.

• Decision Date: 10 April 1992
• Docket Number: No. 90-3448,90-3448
• Citation: 957 F.2d 1281
• Parties: Lewis R. CRIST, Director, Division of Insurance, Department of Economic Development, State of Missouri, Acting as a Domiciliary Receiver of Transit Casualty Company in Liquidation, Plaintiff-Appellant, v. DICKSON WELDING, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1281

957 F.2d 1281

22 Fed.R.Serv.3d 441

Lewis R. CRIST, Director, Division of Insurance, Department of Economic Development, State of Missouri, Acting as a Domiciliary Receiver of Transit Casualty Company in Liquidation, Plaintiff-Appellant, v. DICKSON WELDING, INC., et al., Defendants-Appellees.

No. 90-3448.

United States Court of Appeals Fifth Circuit.

April 10, 1992.

Rehearing Denied May 11, 1992.

Andrew S. DeKlerk, Kent B. Ryan, Lemele & Kelleher, New Orleans, La., for plaintiff-appellant.

John C. Combe, Jr., James E. Wright, Edith Brown Clement, Patrick H. Patrick, New Orleans, La., for Alexander & Alexander.

Walter W. Christy, Sidney F. Lewis, Kullman & Inman, New Orleans, La., for Dickson Welding, Inc.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before REYNALDO G. GARZA, GARWOOD, and DUHE, Circuit Judges.

DUHE, Circuit Judge:

Plaintiff brought this diversity suit as receiver for an insolvent insurance carrier, Transit Casualty Company, against a Transit insured, Dickson Welding, Inc., for additional premiums allegedly earned under two policies. Dickson Welding denied that more premiums were due, asserting several defenses and, alternatively, impleaded its broker, Alexander & Alexander ("A & A"). The jury found Transit barred from recovering additional premiums. The district court entered judgment for Dickson Welding and dismissed all third-party claims. Transit appeals, and A & A moves to dismiss the appeal as to A & A. For the following reasons, we reverse the judgment on the jury verdict and grant A & A's motion.

I. THE CLAIMS, DEFENSES, AND ASSIGNED ERRORS

The Transit policies provide for an advance premium based on estimated exposures and for an adjustment of premium based on actual exposures as determined from an audit after the policy period. Although Dickson Welding willingly paid the advance premiums, it refused to pay additional premiums claimed pursuant to audits. Transit's receiver brought this suit against Dickson Welding for the additional premiums.

The issues on this appeal concern Dickson Welding's defenses. Maddox, an agent working for Dickson Welding's broker, A & A, allegedly promised Dickson Welding coverage under policies with a fixed premium, not subject to adjustment or audit. Dickson Welding's first defense was reformation: Dickson Welding argued that the policies should be reformed to reflect the flat-rate premiums promised by Maddox and A & A. Reformation was a bench issue, and the court rejected the defense: it would not rewrite the policy to reflect a flat rate because it found neither mutual mistake nor mistake by one party and fraud by the other.

Dickson Welding asserted three other defenses that went to the jury: equitable estoppel, apparent authority, and in pari delicto. In the estoppel defense, Dickson Welding asserts that it justifiably relied in good faith on some representation of Transit or Transit's agent, Miro and Associates, and that Dickson Welding acted to its detriment because of that reliance. Transit moved for a directed verdict on Dickson Welding's estoppel defense, but the court denied the motion. The apparent-authority defense concerns whether Transit is bound by the actions of its "apparent" agent, Miro: Dickson Welding asserts that because it was justified in assuming that Miro had the authority to perform acts to bind Transit, Transit is bound by Miro's acts. The defense of in pari delicto, meaning "of equal fault," bars a plaintiff from recovering damages if his losses are substantially caused by activities which the law forbids him to do.

Transit assigns as errors the denial of its motions for directed verdict, for a judgment notwithstanding the verdict, and for a new trial. Transit also asks us to consider whether the verdict was erroneous and unreasonable. ¹ Transit also claims that the jury was improperly instructed regarding reasonable reliance, which is an essential element of both the estoppel and apparent-authority defenses.

II. THE MOTIONS TO TAKE THE CASE FROM THE JURY

A. Estoppel.

At the close of Transit's evidence against Dickson Welding, Transit moved for a directed verdict on estoppel and waiver, urging that neither could be a defense, apparently because of the lack of evidence of the element of reasonable reliance. ² The court initially granted the motion for directed verdict, rejecting waiver and finding a different essential element of estoppel lacking: the good faith of Dickson Welding (through its president, Marcus Dickson). Both the good faith of the party seeking to invoke the doctrine of equitable estoppel and reasonable reliance on the representation are required for application of the defense. See Wilkinson v. Wilkinson, 323 So.2d 120, 126 (La.1975); Westenberger v. Louisiana Dep't of Educ., 333 So.2d 264, 271 (La.Ct.App.1976). The trial judge was evidently not impressed with the suggestion that there was no evidence of reasonable reliance, as he did not mention reasonable reliance in his ruling.

After a recess, the district judge rescinded his ruling in order to consider the evidence in Dickson Welding's cross-claim against A & A. At the close of all the evidence, the court assumed that all motions were renewed and denied Transit's motion for directed verdict on the estoppel question. Transit later moved for a judgment notwithstanding the verdict, reiterating its argument on estoppel and adding an argument on apparent authority.

We review the rulings on the motions for directed verdict and judgment notwithstanding the verdict de novo, under the same standard applied by the district court: under either motion, "[i]f the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict," then the motion should be granted. Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969).

As to the defense of estoppel, we agree with the district court that reasonable people could indeed differ on the question of estoppel, particularly the good faith of Dickson Welding (as represented by Mr. Dickson), which was the basis of the court's initial ruling. For example, Maddox of A & A testified that he relied on representations of Miro employees that Transit policies were being sold with fixed-rate premiums, and Mr. Dickson testified that he relied on Maddox. The jury no doubt resolved the question of Dickson Welding's good faith by assessing Mr. Dickson's demeanor and credibility. Additionally, an expert testified that audits were not mandatory and could be waived, although there was conflicting testimony. Finally, some evidence showed Miro often waived audits notwithstanding standard-form language requiring an audit.

Because reasonable persons could differ regarding Dickson Welding's good faith and the reasonableness of its reliance, the trial court correctly allowed the defense of estoppel to go to the jury.

B. Apparent Authority.

Transit did not move for a directed verdict on Dickson Welding's defense of apparent authority, but did move for a judgment n.o.v. on that defense. In its motion for judgment n.o.v. and on this appeal, Transit attempts to tie the apparent-authority defense to the estoppel defense, on which it did move for directed verdict: Transit urges that the facts mandate a judgment notwithstanding the verdict whether the issue is "justifiable reliance" for estoppel or "reasonable reliance" for apparent authority.

If a party has not moved for a directed verdict on an issue yet seeks judgment n.o.v. on that issue, our review is extremely limited. Seidman v. American Airlines, 923 F.2d 1134, 1138 (5th Cir.1991); see also Fed.R.Civ.P. 50(b). ³ In such cases "our inquiry is restricted to whether there was any evidence to support the jury's verdict, irrespective of its sufficiency, or whether plain error was committed which, if not noticed, would result in manifest miscarriage of justice." Seidman, 923 F.2d at 1138 (citing Hinojosa v. City of Terrell, Tex., 834 F.2d 1223, 1228 (5th Cir.1988), cert. denied, 493 U.S. 822, 110 S.Ct. 80, 107 L.Ed.2d 46 (1989)) (emphasis in original).

Apparent authority is a judicially created concept of estoppel which operates in favor of a third party (Dickson Welding) seeking to bind a principal (Transit) for the unauthorized act of an apparent agent (Miro). See Boulos v. Morrison, 503 So.2d 1, 3 (La.1987). For the doctrine of apparent authority to apply, the principal must first act to manifest to an innocent third party the alleged agent's authority. Second, the third party must rely reasonably on the manifested authority of the agent. Id. The testimony that audits could be waived and that Miro often waived audits in spite of contractual language requiring audits constitutes evidence that would support a finding that Dickson Welding's or Maddox's reliance on a representation that the audits were waived was reasonable. Accordingly, the motion for directed verdict on the issue of apparent authority was also properly denied.

III. THE JURY CHARGE ERROR

Transit next asserts that the court improperly charged the jury about reasonable reliance, an element of both the estoppel and apparent-authority defenses. Dickson Welding urges that we need not consider this assigned error because the jury may well have based its judgment on the in pari delicto defense. Thus, Dickson Welding argues, because an independent basis for the verdict supports the judgment, we need not consider the errors assigned by Transit with respect to the other two defenses.

A. The Verdict and Scope of Our Review.

The jury interrogatory did not distinguish among the three defenses, providing simply:

Is Transit barred from recovering additional premiums from Dickson [Welding] even though the insurance policies in question provided for an adjustment of premiums by audit?

YES /

NO

When two or more claims are submitted to a jury in a single interrogatory, a new trial may...