Mid Century Ins. Co. v. American Centennial Ins. Co.

• Decision Date: 16 May 1997
• Docket Number: No. 95-56515,95-56515
• Citation: 108 F.3d 1385
• Parties: NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. MID CENTURY INSURANCE COMPANY, a Calif corp., Plaintiff-Appellant v. AMERICAN CENTENNIAL INSURANCE CO., a Delaware corp, Defendant-Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1385

108 F.3d 1385

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

MID CENTURY INSURANCE COMPANY, a Calif corp., Plaintiff-Appellant v. AMERICAN CENTENNIAL INSURANCE CO., a Delaware corp, Defendant-Appellee

No. 95-56515.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 5, 1997.

Decided March 17, 1997.

As Amended May 16, 1997.

Before: TROTT AND REINHARDT, Circuit Judges, and BRYAN, District Judge. ^*

MEMORANDUM ^**

Mid-Century Insurance Co. ("Mid-Century") appeals the district court's grant of summary judgment in favor of American Centennial Insurance Company ("ACIC"). Mid-Century (reinsured) and ACIC (reinsurer) were parties to several reinsurance contracts. ¹ Mid-Century contends that extrinsic evidence is necessary to show that a Commutation and Release Agreement ("commutation") ² between the parties related only to two treaties ³ and their renewals, and did not include facultative certificates ⁴ between Truck Insurance Exchange ("Truck"), a subsidiary of Mid-Century, and ACIC. Mid-Century also argues that it justifiably relied on misrepresentations by ACIC, and that it is entitled to rescission of the commutation. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

STANDARD OF REVIEW

A grant of summary judgment is reviewed de novo. Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996). Our review is governed by the same standard used by the trial court under Fed.R.Civ.P. 56(c). Suitum v. Tahoe Regional Planning Agency, 80 F.3d 359, 361 (9th Cir.1996), cert. granted, 117 S.Ct. 293 (1996). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Bagdadi, 84 F.3d at 1197. We must not weigh the evidence or determine the truth of the matter but only determine whether there is a genuine issue for trial. Abdul-Jabar v. General Motors Corp., 85 F.3d 407, 410 (9th Cir.1996). When a mixed question of fact and law involves undisputed underlying facts, summary judgment may be appropriate. Han v. Mobil Oil Corp., 73 F.3d 872, 874 (9th Cir.1995). Summary judgment is not proper, however, if material factual issues exist for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995).

Because the district court had diversity jurisdiction, we apply Delaware substantive law, as the Delaware Supreme Court would apply it. See, e.g., Intel Corp. v. Hartford Acc. & Indem. Co., 952 F.2d 1551, 1556 (9th Cir.1991).

DISCUSSION

1. Is the Agreement Plain and Clear on its Face?

Several terms of the commutation agreement are at issue. In pertinent part, the language of the commutation is as follows:

COMMUTATION AND RELEASE AGREEMENT ("Commutation") entered into between AMERICAN CENTENNIAL INSURANCE COMPANY on behalf of itself and its affiliates, parents and subsidiaries ("REINSURER"), and MID-CENTURY INSURANCE COMPANY on behalf of itself and its affiliates, parents and subsidiaries("REINSURED"), effective the sixth day of October 1989.

WHEREAS, the REINSURER entered into numerous reinsurance agreements with the REINSURED, whereby REINSURER, in consideration of payment of premium, was committed to reinsure certain risks insured by REINSURED (the "Agreements");

WHEREAS, the REINSURER and REINSURED desire fully and finally to settle and commute all rights, obligations and liabilities, known and unknown, of the REINSURER and REINSURED under the Agreements;

............................................................

....................

* * *

NOW, THEREFORE, IT IS AGREED BY AND BETWEEN THE REINSURER AND REINSURED THAT:

* * *

3. If and when the payment of ... has been fully made by the REINSURER, the REINSURED shall release and discharge the REINSURER, its predecessors, parents, affiliates, subsidiaries, agents, officers, director, shareholders, successors and assigns from any and all present and future payment obligations, adjustments, executions, offsets, actions, causes of action, suits, debts, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, damages, judgments, claims, demands, liabilities and/or losses whatsoever, all whether known or unknown, which the REINSURED, and their successors and assigns, ever had, now have, or hereafter may have, whether grounded in law or in equity, in contract or in tort, against the REINSURER or any of them by reason of any matter whatsoever arising out of the agreements, it being the intention of the parties that this release operate as a full and final settlement of the REINSURER'S past, current and future liabilities to the REINSURED under said Agreements.

* * *

6. The parties hereto expressly warrant and represent that they are corporations in good standing in their respective places of domicile; that the execution of this Commutation is fully authorized by each of them; that the person or persons executing this Commutation have the necessary and appropriate authority to do so; that there are no pending agreements, transactions, or negotiations to which any of them are a party that would render this Commutation or any part thereof void, voidable, or unenforceable; and that no authorization, consent or approval of any government entity is required to make this Commutation valid and binding upon them; and that none of the claims being paid or settled under this Commutation have been previously assigned or transferred to any other person or entity.

* * *

10. This Commutation contains the entire agreement between the parties as respects its subject matter. All discussions and agreements previously entertained between the parties concerning the subject matter of the Commutation are merged into this Commutation. This Commutation may not be modified or amended, nor any of its provisions waived, except by an instrument in writing, signed by both parties hereunder.

Under Delaware law, the intentions of the parties "must be ascertained from the language of the contract." Citadel Holding Corp. v. Roven, 603 A.2d 818, 822 (1992) (citations omitted). Therefore, the language of the contract must be the starting point for our analysis. Id. "A contract must be construed as a whole, giving effect to all of its provisions and avoiding a construction which would render any of those provisions illusory or meaningless." Seabreak Homeowners Ass'n Inc. v. Gresser, 517 A.2d 263, 269 (Del.Ch.1986) (citations omitted). Further, the "meaning which arises from a particular portion of an agreement cannot control the meaning of the entire agreement where such inference runs counter to the agreement's overall scheme or plan." E.I. du Pont de Nemours & Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del.1985) (citations omitted). See also Playtex FP, Inc. v. Columbia Casualty Co., 622 A.2d 1074 (Del.1992). In City Investing Co. v. Liquidating Trust v. Continental Casualty Co., 624 A.2d 1191, 1198 (Del.1993), the court considered whether the term "any liabilities" contained certain exceptions. The court held that

the language of an agreement, like that of a statute, is not rendered ambiguous simply because the parties in litigation differ concerning its meaning.... For City Trust now to seek to read into that language an unarticulated reservation concerning claims which would be barred two years hence under Section 278, a provision not mentioned in the Trust Agreement, is imaginative but does violence to the clear meaning of the language selected.

624 A.2d at 1198 (citations omitted).

Mid-Century argues that the phrase "on behalf of" in the first clause of the agreement means only those agreements that Mid-Century had a role in controlling, and that the Truck certificates were necessarily excluded because Mid-Century had no role in those agreements between ACIC and Truck. Mid-Century also contends that if the parties had intended a global settlement of all treaties and facultative certificates, the commutation agreement would have used the word "and" instead of "on behalf of." These arguments are belied by both the four corners of the agreement and the facts of the case. Mr. Allison, vice-president of Mid-Century and a signatory to the commutation, testified that his office included Truck. Truck is clearly a subsidiary of Mid-Century, as set forth in Mid-Century's annual statement. There is no significant difference between the word "and" and the phrase "on behalf of," as those terms are used here.

Mid-Century next argues that the phrase "numerous agreements" do not mean "all agreements" and that the parties obviously intended to include only the treaties, which were the primary subject of discussion during the negotiations. The question here is not how many agreements there are between the parties but whether the term "numerous" means all of the agreements. When this word is considered in context of the entire agreement, it means all agreements. See, for example, the third introductory clause "WHEREAS, the REINSURER and REINSURED desire fully and finally to settle and commute all rights, obligations and liabilities, known and unknown ..."; Paragraph 2 "REINSURED shall accept the sum ... in full and final settlement of any and all amounts due by REINSURER to REINSURED on the Agreements;" Paragraph 3, quoted supra. The same language of Paragraph 3 appears in Paragraph 4 as between the Reinsurer and the Reinsured. Paragraph 6 sets forth terms invalidating any other agreements which would make the commutation void or voidable. Paragraph 10 states that the commutation is the entire agreement between the parties and all discussions are merged into the commutation.

Certainly, if the parties intended to separate the Truck certificates...