Monarch Ins. Co. of Ohio v. Siegel, Civ. No. F 84-81.

• Decision Date: 30 April 1986
• Docket Number: Civ. No. F 84-81.
• Citation: 634 F. Supp. 1252
• Parties: The MONARCH INSURANCE COMPANY OF OHIO, Plaintiff, v. David SIEGEL, et al., Defendants.
• Court: U.S. District Court — Northern District of Indiana

634 F. Supp. 1252

The MONARCH INSURANCE COMPANY OF OHIO, Plaintiff, v. David SIEGEL, et al., Defendants.

Civ. No. F 84-81.

United States District Court, N.D. Indiana, Fort Wayne Division.

April 30, 1986.

Stephen P. Kenney, Chicago, Ill., Thomas M. Kimbrough, Fort Wayne, Ind., for plaintiff.

Neil F. Sandler & Frederick A. Beckman, Fort Wayne, Ind., for Siegel and L & S.

Gary M. Capelli, Fort Wayne, Ind., for Ora Ackerman.

ORDER

WILLIAM C. LEE, District Judge.

This matter is before the court on a motion for summary judgment filed by plaintiff Monarch Insurance Company of Ohio ("Monarch") against defendants David Siegel ("Siegel"), L & S Equipment, Inc. ("L & S") and Ora Ackerman ("Ackerman"). The defendants have filed memoranda in opposition, and Monarch has filed its reply. For the following reasons, the motion for summary judgment will be granted.

This cause arises out of the attempts to determine liability in the aftermath of a plane crash during an attempted landing at the Indianapolis International Airport in February 1983. Monarch, as the named insurer of the aircraft, sued Siegel, L & S, Ackerman, and several passengers, claiming that it was not liable under the insurance policy for the damage caused by the crash. On January 2, 1986, this court granted Monarch summary judgment as against Siegel and L & S, holding that two coverage exclusion clauses in the policy relieved Monarch of liability under the policy. Now Monarch again moves for summary judgment, this time seeking a judgment for the amount paid by Monarch to Piper Acceptance Corporation ("PAC"), a holder of a conditional sales contract lien on the aircraft, as well as prejudgment interest and attorney fees.

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment may only be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Thus, summary judgment serves as a vehicle with which the court "can determine whether further exploration of the facts is necessary." Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975).

In making this determination, the court must keep in mind that the entry of summary judgment terminates the litigation, or an aspect thereof, and must draw all inferences from the established or asserted facts in favor of the non-moving party. Munson v. Friske, 754 F.2d 683, 690 (7th Cir.1985). The non-moving party's reasonable allegations are to be accepted as true for purposes of summary judgment. Yorger v. Pittsburgh Corning Corp., 733 F.2d 1215, 1218-19 (7th Cir.1984). A party may not rest on the mere allegations of the pleadings or the bare contention that an issue of fact exists. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). See Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). See also Atchison, Topeka & Santa Fe Railway Co. v. United Transportation Union, 734 F.2d 317 (7th Cir.1984); Korf v. Ball State University, 726 F.2d 1222 (7th Cir.1983). See generally C. Wright, Law of Federal Courts, § 99 (4th ed. 1983); 6 Moore's Federal Practice, § 56.15 (2d ed. 1984).

Thus, the moving party must demonstrate the absence of a genuine issue of material fact. Even if there are some disputed facts, where the undisputed facts are the material facts involved and those facts show one party is entitled to judgment as a matter of law, summary judgment is appropriate. Egger v. Phillips, 710 F.2d 292, 296-97 (7th Cir.1983); Collins v. American Optometric Assn., 693 F.2d 636, 639 (7th Cir.1982). See also Bishop v. Wood, 426 U.S. 341, 348, 348 n. 11, 96 S.Ct. 2074, 2079, 2079 n. 11, 48 L.Ed.2d 684 (1976).

In light of these principles, the facts relevant to the disposition of this motion are as follows. On August 23, 1982, L & S purchased a Piper Turbo Seminole aircraft from Tasco Aviation Supply Company. L & S, by Siegel's signature, signed a Conditional Sales and Security Agreement, which was immediately assigned to PAC. This agreement contained the following language:

If there is a default ... and we notify you that you must immediately pay your full indebtedness hereunder, you must pay us interest from the date of notice until the date you make final payment at the highest interest rate allowed by law, plus all costs of collection including reasonable attorney's fees.

* * * * * *

10. Default. Buyer shall be in default under this Agreement upon the happening of ... (d) Loss, theft, damage, destruction, sale or encumbrance of or to the Aircraft....

* * * * * *

11. Remedies. In the event of default, the full amount of the Time Balance remaining due ... shall become immediately due and payable without notice, and Seller or its agent may ... (a) Collect the same by suit or otherwise.

A rider to the Conditional Sales Agreement sets forth the payment schedule under the Agreement, and sets the interest rate as being 13% for the first twenty-four months, and 1.5% above the prime rate of the Pittsburgh National Bank for all months thereafter, with the proviso that this latter rate "shall never go below 15% nor above 20% per annum."

L & S and Siegel obtained insurance on the plane by taking out a policy issued by Monarch through Crump Aviation Underwriters. For an additional premium, L & S and Siegel also had issued a "Breach of Warranty Endorsement" whereby Monarch agreed to pay PAC under the policy. The Breach of Warranty Endorsement contained the following language (hereinafter referred to as the "subrogation clause"):

Whenever the Company shall pay the Lienholder any sum for loss or damage under this policy and shall claim that, as to the Insured or owner, no liability therefor existed, the Company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the Lienholder against the Insured or owner and in and to all the property held as security for indebtedness: or the Company may, at its option, pay the said Lienholder the whole amount due or to become due from the Insured or owner, with interest, and shall thereupon be entitled to receive a full assignment and transfer of all the rights of said Lienholder against the Insured or owner of all property held as security for the indebtedness.

The accident occurred in February 1983, and when PAC sought payment under the Conditional Sales Agreement, Siegel directed PAC to Monarch who, on September 1, 1983, paid PAC $93,442.22 as full payment under the Conditional Sales Agreement. To obtain its payment, PAC executed a Proof of Loss claim form and an assignment of all its rights under the Sales Agreement to Monarch. The Proof of Loss claim filed by PAC contained the following language:

The Lienholder hereby agrees to accept the sum of $93,442.22 in full satisfaction and settlement of all rights which the said Lienholder enjoys under BREACH OF WARRANTY ENDORSEMENT provisions of Policy No. CC169933 issued to L & S Equipment, Inc. on February 24, 1983. In consideration of said payment, the Lienholder further agrees that, to the extent of this payment, The Monarch Insurance Company of Ohio shall be legally subrogated to all the rights of the Lienholder as respects the indebtedness and, in and to all the property held as security for the indebtedness under the above-mentioned chattel mortgage and note. Upon payment of the loss in accordance with the terms of said BREACH OF WARRANTY ENDORSEMENT, Lienholder will assign and transfer all of its rights under and interest in said chattel mortgage and note and the security therefor.

The assignment was executed on August 17, 1983.

In mid-September 1983, Monarch sent a letter to L & S demanding payment of the $93,442.22. L & S did not pay, and this lawsuit followed.

In responding to this motion, L & S has admitted that Monarch is entitled to receive the $93,442.22 plus prejudgment interest. What is at issue is the rate of prejudgment interest and whether Monarch is entitled to attorneys fees under the provisions of the Conditional Sales Agreement. Monarch seeks to have the Agreement's interest rate of 13% for the first eighteen months, and 15% thereafter, applied in the calculation of prejudgment interest, and also seeks to invoke the Agreement's provisions regarding attorney's fees. Monarch believes the Agreement applies by virtue of the assignment and subrogation of PAC's interests. L & S argues that because of the nature of Monarch's promise under the Breach of Warranty Endorsement, and because the Proof of Loss claim of PAC speaks of Monarch being "subrogated to" the interests of PAC, the Assignment is without effect and thus Monarch is entitled only to indemnification rights as subrogee, which means repayment of the $93,442.22 and nothing more (except statutory 8% prejudgment interest).

Ackerman, who piloted the plane and has admitted his negligence, opposes summary judgment on the grounds that a material issue of fact exists. According to Ackerman, Monarch can only sue him through L & S and Siegel by virtue of a subrogation of their rights against him. Ackerman claims that such a subrogated right would be subject to whatever defenses he could raise against L & S, and he argues that a defense does exist: that L & S allegedly agreed to insure Ackerman and failed to do so. Ackerman therefore concludes that the factual dispute about whether such an agreement was made precludes summary judgment.

Claims Against L & S and Siegel

The essence of the dispute between Monarch and L & S on the motion for summary judgment is whether the provisions of the Conditional Sales Agreement can be invoked by Monarch as the assignee of PAC. Monarch claims that PAC executed an assignment of all rights in consideration for Monarch's payment under the Breach of Warranty Endorsement, and that both...