Heyman v. Commerce & Industry Ins. Co.

Citation524 F.2d 1317
Decision Date24 October 1975
Docket NumberNo. 92,D,92
PartiesAnnette HEYMAN, Plaintiff-Appellee, v. COMMERCE AND INDUSTRY INSURANCE COMPANY, Defendant-Appellant. ocket 75-7230.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Lawrence P. Weisman, Bridgeport, Conn. (Cohen & Wolff, P. C., Bridgeport, Conn., on the brief), for plaintiff-appellee.

John Keogh, Jr., Norwalk, Conn. (James J. Farrell, Norwalk, Conn., on the brief), for defendant-appellant.

Before KAUFMAN, Chief Judge, and FRIENDLY and SMITH, Circuit Judges.

IRVING R. KAUFMAN, Chief Judge:

Although the basic principles for granting summary judgment 1 are well-established, the frequent recurrence of cases in which granting it is inappropriate persuades us that these underlying tenets bear repetition. In order to elucidate the impropriety of applying summary judgment in the present case involving the interpretation of an insurance settlement agreement, a brief review of the facts is appropriate.

Annette Heyman, a Connecticut resident, owns a shopping center in Westfield, Massachusetts. In April, 1972, she secured a three-year fire insurance policy on this property from the defendant Commerce and Industry Insurance Company. The policy contained a "Replacement Cost Coverage Endorsement" which permitted Heyman, in the event of fire loss, to elect to receive either "replacement cost" or "actual cash value." If she chose "replacement cost" reimbursement, the insurance company's liability would be limited to the smallest of the following amounts:

(a) The amount of this policy applicable to the damaged or destroyed property;

(b) the replacement cost of the property or any part thereof identical with such property on the same premises and intended for the same occupancy and use; or

(c) the amount actually and necessarily expended in repairing or replacing said property or any part thereof.

Replacement Cost Coverage Endorsement, Par. 5 (emphasis added).

On September 10, 1972, a one-story auto-service station/warehouse, 14,000 square feet in size, located in the Westfield shopping center and leased to Sears, Roebuck & Co. was totally destroyed by fire. Heyman promptly submitted a claim to the insurance company alleging the replacement cost of the destroyed property to be $247,265.

After a period of discussions and negotiations, the parties executed a settlement agreement on August 2, 1973. Among other recitals the third introductory clause stated that the (I)nsured intends to construct a new building at the Sears, Roebuck complex in order to replace the building which was destroyed and construction of the new building has already commenced(.)

(Emphasis added.) The settlement agreement concluded with these provisions:

1. In consideration for payment by insurer to insured of $187,500, the parties for themselves, their successors and assigns, agree to remise, release, and forever discharge any and all claims which they may have against each other arising under the above-mentioned insurance policy including, but not limited to, insured's claim in connection with the above-mentioned fire loss.

2. Payment of the $187,500 shall be made as follows:

$150,000 to be paid, all cash, upon execution of this agreement and $37,500 to be paid, all cash, when insured has proceeded to the stage of construction of the new building where said building shall be water-tight in other words, upon completion of construction of the walls and roof of said building. (Emphasis added)

The insurance company paid, as required, $150,000 upon execution of the agreement. It has refused to pay the additional $37,500 despite notification that the new building is "watertight." The reason assigned for the insurer's unwillingness to disburse the balance is its discovery that the "replacement" building is a single-story structure containing an area of only 4,000 square feet some 10,000 square feet less than the size of the original building. The insurance company argues that its obligation is to pay the remaining $37,500 only if the destroyed building is replaced by a new edifice of comparable size and condition.

Because of Heyman's disagreement over this interpretation, she instituted suit in Connecticut Superior Court in August, 1974 for enforcement of the settlement agreement. The case was removed to federal district court one month later, and shortly thereafter both parties moved for summary judgment. Chief Judge Clarie granted Heyman's motion, holding that

A reading of the general tenor of the second contract and consideration of the circumstances under which it was executed, establishes a reasonable basis for the Court to find that the parties intended the company's fire loss obligations under the policy to be merged into this final (settlement) agreement. . . .

The Court is persuaded from the overall record, that these mutual release provisions were intended by the parties to determine and end their dispute. . . .

Although we might not have any quarrel with this conclusion had it been made after a full-scale trial, it was erroneous to render such a decision in the circumstances present here, upon a motion for summary judgment.

The Federal Rules of Civil Procedure provide several tools to aid in ascertaining the facts before the curtain ascends on a trial, see E. Warren, 38 Conn.B.J. 3 (1964). One such "tool" is the Rule 56 summary judgment procedure which enables the court to determine whether the "curtain" should rise at all. Fitzgerald v. Westland Marine Corp., 369 F.2d 499, 500 (2d Cir. 1966). Although for a period of time this Circuit was reluctant to approve summary judgment in any but the most extraordinary circumstances, see, e. g., Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946), that trend has long since been jettisoned in favor of an approach more in keeping with the spirit of Rule 56, First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-90, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Dressler v. M. V. Sandpiper, 331 F.2d 130 (2d Cir. 1964); Beal v. Lindsay, 468 F.2d 287, 291 (2d Cir. 1972). But, the "fundamental maxim" remains that on a motion for summary judgment the court cannot try issues of fact; it can only determine whether there are issues to be tried. American Manuf. Mutual Ins. Co. v. American Broadcasting-Paramount Theatres, Inc., 388 F.2d 272, 279 (2d Cir. 1967); Cali v. Eastern Airlines, Inc., 442 F.2d 65, 71 (2d Cir. 1971). Moreover, when the court considers a motion for summary judgment, it must resolve all ambiguities and draw all reasonable inferences in favor of the party against whom summary judgment is sought, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962), with the burden on the moving party to demonstrate the absence of any material factual issue genuinely in dispute, Adickes v. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26...

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