Northern Sec. Ins. Co. v. Mitec Electronics

Decision Date01 August 2008
Docket NumberNo. 07-109.,07-109.
Citation2008 VT 96,965 A.2d 447
CourtVermont Supreme Court
PartiesNORTHERN SECURITY INSURANCE COMPANY v. MITEC ELECTRONICS, LTD., Mitec Telecom, Inc. and Myer T. Bentob.

Bruce C. Palmer of Downs Rachlin Martin, PLLC, St. Johnsbury, for Plaintiff-Appellee.

Samuel Hoar, Jr. and Douglas D. Le Brun of Dinse, Knapp & McAndrew, P.C., Burlington, for Defendants-Appellants.

Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.

¶ 1. REIBER, C.J.

Defendants Mitec Electronics Limited, Mitec Telecom Incorporated, and Myer T. Bentob appeal from a series of adverse superior court orders in a declaratory-judgment action concerning insurance coverage filed by plaintiff Northern Security Insurance Company (NSIC). Defendants' claims of error fall into three general categories: (1) jurisdictional; (2) the interpretation of a general release; and (3) plaintiff's post-judgment motion seeking to amend its complaint to request recoupment of attorney's fees. We affirm in part and reverse in part.

¶ 2. The facts underlying this appeal extend nearly three decades into the past. From 1979 until 1985, Mitec Systems, a Vermont corporation, leased property in the Alling Industrial Park in Williston, Vermont. Mitec Systems allegedly polluted this property, and the groundwater underneath it, with industrial chemicals used in its manufacturing processes. The State and other parties sued "Mitec Systems Corp. d/b/a Mitec Electronics, Ltd." in 1984 for damages, cleanup costs, and other relief. Mitec Systems sought coverage for those claims under an insurance policy issued by NSIC to Mitec Systems and Mitec Manufacturing Company, Ltd., a Canadian corporation, ATIMA.

¶ 3. In 1988, after the 1984 claims were resolved, Mitec Systems brought an action against NSIC to recover certain unreimbursed costs of defense and cleanup. That coverage action settled in 1989. The 1989 General Release executed in connection with that settlement recites that, in exchange for $16,250, "Mitec Systems Corporation," by its President and majority shareholder Myer Bentob, broadly "remise[d], release[d] and forever discharge[d]" NSIC

from all, and all manner of action and actions, cause and causes of action, ... claims and demands whatsoever, in law or in equity, which against the said [NSIC] ever had, now has or which its successors, affiliates or assigns hereafter can, shall or may have.

Later in 1989, the Vermont Secretary of State dissolved Mitec Systems for failing to file annual reports.

¶ 4. Some nine years later, in 1997, Gerald and Nancy Bates, who live near the Williston industrial park, sent a letter to Mitec Telecom, a Canadian corporation formed in 1996 as a result of the amalgamation of Mitec Electronics and another Canadian corporation, asserting pollution-related claims against Mitec Systems, Mitec Electronics, and Mitec Telecom. The letter warned Mitec Telecom to expect a settlement demand from the Bates's counsel, and noted that the State of Vermont was still investigating previously unexplored federal remedies relating to the earlier pollution. In June 1997, Mitec Telecom informed NSIC about the letter and demanded coverage under the same policy that provided coverage against the 1984 lawsuit, asserting that it had acquired Mitec Systems' rights to coverage under the NSIC-issued CGL policy, but not stating how or why. See N. Sec. Ins. Co. v. Mitec Telecom, Inc., 38 F.Supp.2d 345, 346 n. 1 (D.Vt.1999). NSIC notified Mitec Telecom in November 1997 that it would not provide coverage under the policy, and simultaneously brought an action in Washington Superior Court seeking a declaration that it had no duty to defend Mitec Telecom. Id. at 346. The suit was removed to federal court, and Judge Sessions concluded that the demand letter did not constitute a "suit" and was therefore insufficient to trigger NSIC's duty to defend. Id. at 349.

¶ 5. In 1999, the Bates plaintiffs filed suit in superior court, seeking damages and other relief arising from Mitec Systems' pre-1989 pollution in the Williston industrial park. The suit named Mitec Systems, Mitec Electronics, the Beatrice Alling Trust, and Beatrice Alling as defendants. Myer Bentob was not a named defendant. NSIC agreed to defend all three Mitec companies in the Bates suit, subject to a September 1999 bilateral non-waiver agreement, which provided as follows:

Should [NSIC] establish a lack of defense coverage of any party by judgment of a court of competent jurisdiction, it may withdraw from the defense of that party on 30 days written notice of its intent to withdraw. In such event, [NSIC] reserves its right to argue and seek an order from a court that it may recoup from Mitec its costs of defending that party. Mitec expressly denies that [NSIC] would have any such right to recoupment and by executing this Agreement does not waive its right to make this assertion in any proceeding.

The nonwaiver agreement purported to bind, on the one hand, "Mitec Electronics, Ltd. (through the authorized agent of a majority of its former shareholders), Mitec Systems Corporation (through the authorized agent of its former shareholders), and Mitec Telecom, Inc. (through its duly authorized agent), collectively called `Mitec'" and, on the other hand, NSIC. The agreement was signed by Myer Bentob on behalf of each of the three named Mitec companies, and by NSIC's general counsel.

¶ 6. In October 1999, NSIC filed this complaint for declaratory relief in the Washington Superior Court, naming Mitec Electronics, Mitec Systems, Mitec Telecom, and Myer Bentob as defendants. NSIC sought a judgment declaring that it was under no obligation to provide coverage for Myer Bentob, Mitec Systems, Mitec Electronics, or Mitec Telecom. Beginning with a jurisdictional order dated August 25, 2003, and in a succession of decisions thereafter, the superior court concluded that it had jurisdiction over all of the named defendants and that no coverage was available to any of them because of the 1989 general release.

¶ 7. The August 25, 2003 order, a declaratory judgment order dated April 13, 2004, and a judgment dated July 1, 2004, give rise to several claims in the instant appeal, concerning the court's jurisdiction and the scope and effect of the general release. First, defendants argue that NSIC failed to state a claim for which relief can be granted against Myer Bentob, who was not a defendant in the Bates lawsuit. See V.R.C.P. 12(b)(6). The Mitec defendants also contend that the superior court lacked jurisdiction over Mitec Telecom and Mitec Electronics because neither company had purposefully availed itself of the privilege of conducting activities in Vermont. See Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958).

¶ 8. Defendants raise two claims about the general release: (1) it did not bind any entity but Mitec Systems; and (2) it did not extend to future or unknown claims. The first claim rests on defendants' assertions that Mitec Telecom was not a successor, affiliate, or assign of Mitec Systems and that, at a minimum, the term "affiliate" is ambiguous in the context of the release and should therefore be construed against NSIC. As to the second claim, defendants argue that a general release does not bar future claims unless it contains explicit language doing so, and that there was no such language in this release.

¶ 9. The remainder of defendants' claims arise from the superior court's actions after the declaratory judgment in favor of NSIC was entered on July 1, 2004. In it, the superior court ruled that the general release between Mitec Systems and NSIC

bars any and all coverage for defense or indemnity of past or future claims, whether known or unknown, arising out of the Alling Industrial Park (`AIP') Site concerning pre-1989 operations and contamination at the AIP, including the [Bates lawsuit].

The judgment further declared that the general release binds Mitec Electronics and Mitec Manufacturing, "both of which are `affiliates' of Mitec Systems Corp" and "Mitec Telecom, Inc., as a purported or potential successor-in-liability or affiliated company to the other Mitec companies."1 Further facts pertinent to the post-judgment claims of error are adduced below.

¶ 10. We consider the jurisdictional claims first, then turn to the effect of the general release, and finally to the claims arising from the post-judgment amendment.

I. Myer Bentob

¶ 11. Appellants argue that no claim for which relief can be granted was asserted against Myer Bentob, and that the superior court accordingly did not have jurisdiction to adjudicate the question of whether he had coverage. We agree.

¶ 12. In this action, NSIC sought a declaration that "neither the Policy nor any other policy of insurance it has issued provides coverage ... for the liabilities asserted" in the Bates lawsuit. As noted above, Mr. Bentob was not named in the Bates lawsuit and, naturally enough, did not seek coverage for liabilities arising out of it. As to Mr. Bentob, the declaration requested would have been that he was not entitled to something he had never sought, and which he had no reason to seek. Whether he was entitled to such a declaration is just the sort of "abstract question or hypothetical threat [that] is not a sufficient basis for a declaratory judgment." Williams v. State, 156 Vt. 42, 60, 589 A.2d 840, 851 (1990). Mr. Bentob should have been dismissed from the action. V.R.C.P. 12(b)(6).2

II. Personal Jurisdiction: Mitec Telecom and Mitec Electronics

¶ 13. Mitec Telecom and Mitec Electronics also moved to dismiss based on Rule 12(b)(2) of the Vermont Rules of Civil Procedure. The superior court denied the motion, noting that "Mitec's request to [NSIC] to defend the underlying [Bates] action was made in Vermont. The tort alleged in the underlying case was committed in Vermont, and the underlying Bates lawsuit is pending in Vermont." The court concluded that "no matter what the corporate...

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