Pac. Indem. Co. v. Deming

• Decision Date: 05 July 2016
• Docket Number: No. 15–2386,15–2386
• Parties: Pacific Indemnity Company, Plaintiff, Appellant, v. John Deming, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

828 F.3d 19

Pacific Indemnity Company, Plaintiff, Appellant

v.John Deming, Defendant, Appellee.

No. 15–2386

United States Court of Appeals, First Circuit.

July 5, 2016

Daniel Q. Harrington, with whom Cozen O'Connor, Philadelphia, PA, was on brief, for appellant.

Joseph M. Noone, with whom Julie M. Brady and Avery Dooley & Noone LLP, Belmont, MA, were on brief, for appellee.

Before Torruella, Lynch, and Barron, Circuit Judges.

LYNCH

, Circuit Judge.

In this Massachusetts diversity case, plaintiff Pacific Indemnity Company (“Pacific”) seeks to recover damages from John Deming as a result of damages Deming caused to a condominium insured by Pacific. Deming, a tenant, not an owner, of Unit 1801 at 1 Huntington Avenue in Boston, Massachusetts, caused flooding that damaged Unit 1601 in that building. Pacific, which insured Unit 1601, paid Unit 1601's owners $351,159.01 as a result of the incident and, as Unit 1601's subrogee, sought to recover damages in this amount as well as prejudgment interest and costs from Deming.

The district court, on cross-motions for summary judgment, granted judgment in favor of Deming and dismissed the case. Pac. Indem. Co. v. Deming , 140 F.Supp.3d 152, 162 (D. Mass. 2015)

. The district court concluded that Pacific's rights to subrogation were waived based on a clause in the bylaws of 1 Huntington Avenue's condominium trust (“Bylaws”) that unit owners “shall carry insurance,” and that “all such policies shall contain waivers of subrogation.” Id. at 156–61.

We disagree. We think the best reading of the plain language of the Bylaws, Master Deed, and Declaration of Trust (collectively “condominium documents”), is that the required waivers of subrogation do not apply to tenants. However, in any event, Deming presented no evidence that Unit 1601's owners actually waived their insurer's subrogation rights against tenants. And so, even if the Bylaws did require unit owners to purchase insurance that contains waivers of subrogation as to claims against tenants, Pacific can pursue its claims against Deming. We reverse the district court's order and remand.

I.

The parties have stipulated to the following facts: In 2010, Deming rented Unit 1801 at 1 Huntington Avenue in Boston under a lease with that unit's owner. On May 27, 2013, he fell asleep after turning on the bathtub faucets in the master bathroom. The water from the bathtub overflowed and leaked into the condominium units below, causing considerable damage. Pacific, which insured Unit 1601, paid $351,159.01 to that unit's owners as a result of the incident. The parties stipulate that Deming was negligent in turning on the bathtub faucets and then falling asleep while they were running.

On August 4, 2014, Pacific brought a diversity action in the Massachusetts federal district court seeking to recover the amount it had paid to the owners of Unit 1601.¹ Pacific pled that under its policy,² “and otherwise by operation of law, Pacific is duly subrogated to [Unit 1601 owners'] rights against Deming for the damages.”

Deming filed an answer on January 5, 2015, demanding a jury trial and raising several affirmative defenses. On June 18, 2015, Deming filed a motion for summary judgment, arguing, inter alia, that “[t]he waiver of subrogation contained in the plaintiff's insurance policy is enforceable and prohibits the plaintiff's claims against the defendant.”

Deming, in support of his motion for summary judgment, took the position that “the obligation to secure insurance policies with such waivers is a requirement of the condominium association” and pointed to the Declaration of Trust of the condominium association, Trinity Place Condominium. The Declaration of Trust provided in Paragraph 3.E of its Bylaws:

Each Unit Owner shall carry insurance at his own expense for his own benefit insuring, inter alia, his carpeting, wallcoverings other than paint, drapes and other window treatments, furniture, furnishings and other personal property owned by the Unit Owner, and personal liability, and loss assessment coverage, provided that all such policies shall contain waivers of subrogation, and further provided, that the liability of the carriers issuing insurance obtained by the Trustees shall not be affected or diminished by reason of any such additional insurance carried by a Unit Owner.

Deming argued that “[b]y agreeing to the requirements of the condominium association, Pacific's insured purchased an insurance policy that permitted waiving the right of subrogation.”

On July 8, 2015, Pacific opposed Deming's motion for summary judgment and filed a cross-motion for summary judgment. It argued, inter alia, that “[b]ecause defendant, who admits that he is a mere tenant of a Unit Owner of the Trinity Place Condominium ... cannot establish that there is any contractual impediment to plaintiff's pursuit of this subrogation claim against him, plaintiff is entitled to judgment against defendant.” Pacific claimed that its policy language, which provided that the insured “may waive any rights of recovery from another person or organization for a covered loss in writing before the loss occurs,” was not “self-effectuating” but rather “merely authorized plaintiff's insureds/subrogors to enter into separate agreements which waive subrogation against particular ‘persons' or ‘organizations.’ ” Pacific said that Deming “can point to no document indicating that he is such a ‘person’ who received a pre-loss waiver.” Pacific maintained that “the only possibly pertinent language would have to be that contained in Section 3E of the By–Laws,” which Pacific contended could not be interpreted to apply to tenants. Deming opposed the cross-motion on July 29, 2015, and Pacific replied on August 4, 2015.³

The district court entered a memorandum and order on October 16, 2015, in which it allowed Deming's motion for summary judgment and denied Pacific's cross-motion. Pac. Indem. Co. , 140 F.Supp.3d at 154

. The district court noted that Trinity Place's Bylaws required unit owners to obtain an insurance policy that “shall” contain a waiver of subrogation and concluded that this provision applies to tenants. Id. at 158–60. It held, inter alia, (1) that the Bylaws in the case were covenants that ran with the land, id. at 158, and so “Deming is both bound by and benefits from the waiver of subrogation provision because that provision is one that runs with the land,” id. at 159 ; (2) that “the plain meaning of the Bylaws subjects Deming to the insurance and subrogation waiver imposed on Unit Owners,” id. ; and (3) that “allowing Pacific to recover from another Unit Owner (or in this case a tenant), because its insured breached his or [her] obligation to obtain insurance containing a waiver of subrogation, would frustrate the clear intent of the condominium By-laws and allow Pacific to benefit from its insured's breach, an untenable result,” id. at 161. This appeal followed.

II.

A. Standard of Review

Generally, we review orders granting summary judgment de novo. Tang v. Citizens Bank, N.A., 821 F.3d 206, 214–15 (1st Cir.2016)

. Here, Deming contends that this should be considered review of a “case stated,” and as such, we should review for clear error. See United Paperworkers Int'l Union, Local 14, AFL–CIO–CLC v. Int'l Paper Co. , 64 F.3d 28, 31 (1st Cir. 1995). Deming is incorrect.

“[U]nder our precedent, in certain, somewhat unusual cases, [the plenary summary judgment] standard does not apply. In a nonjury case, when the basic dispute between the parties concerns only the factual inferences that one might draw from the more basic facts to which the parties have agreed, and where neither party has sought to introduce additional factual evidence or asked to present witnesses, the parties are, in effect, submitting their dispute to the court as a ‘case stated.’ ” Id.

In such cases, the district court “may engage in a certain amount of factfinding, including the drawing of inferences,” and we review these factual inferences for clear error. Id.

The case stated doctrine does not apply here. As an initial matter, while “the actual meaning of a contractual provision which can reasonably accommodate two or more interpretations should be left to the jury [,] ... the question whether a provision can reasonably support a proffered interpretation is a legal one, to be decided by the court.”⁴ Fleet Nat'l Bank v. Anchor Media Television, Inc. , 45 F.3d 546, 556 (1st Cir. 1995)

. We review legal conclusions de novo. United Paperworkers , 64 F.3d at 32. And to the extent Deming argues that “Pacific seeks to overturn the factual inferences drawn by the District Court,” this argument fails.

First, this is not a “non-jury” case. See García–Ayala v. Lederle Parenterals, Inc. , 212 F.3d 638, 644 (1st Cir. 2000)

; United Paperworkers , 64 F.3d at 31.⁵ Second, “this circuit and others inquire into the intentions of the parties and the district court judge, as evidenced by the record on appeal.” García–Ayala , 212 F.3d at 644. Here, neither the parties nor the district court exhibited the intent to have the district court resolve their motions as a case stated. See id. at 644 n. 4. Further, the district court specifically stated the standard for summary judgment and said that in accordance with this standard, it would view the record in the light most favorable to the non-moving party.

Our review is de novo, “drawing all reasonable inferences in favor of the non-moving party.” Roman Catholic Bishop of Springfield v. City of Springfield , 724 F.3d 78, 89 (1st Cir. 2013)

. As we have repeatedly held, “[o]n an appeal from cross-motions for summary judgment, the standard does not change; we view each motion separately and draw all reasonable inferences in favor of the respective non-moving party.” Id. ; see also United Paperworkers , 64 F.3d at 31 n. 2.

B. Paragraph 3.E of the Bylaws

“The general rule is well established that upon the payment of a loss the insurer is entitled to be subrogated pro tanto to any right of action which...