Smigiel v. Aetna Cas. & Sur. Co., 85-3188

• Decision Date: 31 March 1986
• Docket Number: No. 85-3188,85-3188
• Parties: Stanley K. SMIGIEL, et ux. and Theresa Smigiel, his wife, Plaintiffs-Appellees, v. AETNA CASUALTY AND SURETY COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 922

785 F.2d 922

Stanley K. SMIGIEL, et ux. and Theresa Smigiel, his wife Plaintiffs-Appellees, v. AETNA CASUALTY AND SURETY COMPANY, Defendant-Appellant.

No. 85-3188.

United States Court of Appeals Eleventh Circuit.

March 31, 1986.

Janet L. Brown, Orlando, Fla., Delia D. Rose, John N. Bogdanoff, Daytona Beach, Fla., for defendant-appellant.

Lucinda J. Beneke, Whitson & Whitson, Clearwater, Fla., Michael L. Kinney, Tampa, Fla., for plaintiffs-appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before GODBOLD, Chief Judge, KRAVITCH, Circuit Judge, and SIMPSON, Senior Circuit Judge.

SIMPSON, Senior Circuit Judge:

The Smigiels purchased some improved real property by an agreement for deed in 1979. Aetna Casualty and Surety Company issued them a fire insurance policy covering a commercial building on the land. The Smigiels paid the premiums when they came due and the policy remained in effect at all material times. At the end of February, 1981, the Smigiels sold the land to Alfred Smith who signed a promissory note and a "conditional assignment and modification of agreement for deed" (assignment note). The assignment did not relieve the Smigiels of their obligation to make payments under the original agreement but it did provide that the Smigiels would retain a purchase-money lien against the property to secure the debt evidenced by Smith's note.

On September 15, 1981, the building was damaged by fire. Two days later, Smith notified Aetna which sent an adjuster. The adjuster estimated the damages at $99,021.35. Smith accepted the estimate and hired a contractor to begin repairs. Shortly thereafter, Aetna informed Smith and the contractor that it was denying coverage because the policy had not been endorsed to reflect Smith's ownership.

On October 5, the Smigiels informed Aetna that they would accept payment in an amount equal to the estimate that the adjuster had given Smith. At the end of October, the Smigiels, having received no payment from Aetna, requested a proof of loss form but the insurer refused to comply with their request on the grounds that the Smigiels had no insurable interest. On November 13, the Smigiels filed a sworn proof of loss on plain paper. At approximately the same time they demanded that Aetna comply with the terms of its policy and appoint an appraiser to determine the amount of damages. Aetna refused this request for the first step leading to damage arbitration under the terms of the policy again asserting lack of an insurable interest as justification for its inaction.

In December the Smigiels sued Aetna in a Florida state court. Aetna responded with an answer which pleaded several affirmative defenses and admitted that the Smigiels had an insurable interest in the property. Aetna later moved for, and obtained, removal to federal district court. There, in a pretrial stipulation, Aetna admitted coverage. Shortly before trial, however, Aetna moved for summary judgment, arguing that the Smigiels were not entitled to any recovery under the policy because Smith had repaired the premises and had continued to make the full payments required by the assignment and note. The district court cited three Florida cases, all of which were written by the same intermediate appellate court, in addressing the issue. Two of the cases espoused "The New York Rule" which holds that a vendor who holds a purchase money lien against a building may recover the full outstanding purchase price from his insurer if the building is completely destroyed by fire, regardless of the fact that the vendee, or the vendee's insurer later pays or reduces the outstanding balance; Springfield Fire and Marine Insurance Co. v. Boswell, 167 So.2d 780, 785 (Fla.1st Dist.Ct.App.1964); Rutherford v. Pearl Assurance Co., 164 So.2d 213, 215-16 (Fla.1st Dist.Ct.App.1964) (dicta). The judge found the applicable Florida law "unclear" however, because the applicable subsections of Florida's Valued Policy Law, Fla.Stat. Sec. 627.702 (1981), applied different rules of recovery to partial and total losses. ¹ Moreover, the same court which had written Springfield and Rutherford had also held in a later case that: "... subsequent partial or full extinguishment of the debt giving rise to the insurable interest will reduce the loss-payee's interest in the proceeds to the extent that the debt has been satisfied." South Carolina Insurance Co. v. Pensacola Home and Savings Association, 393 So.2d 1124, 1125 (Fla.1st Dist.Ct.App.1980). In South Carolina Insurance, the court stated that the creditor's interest in the insurance is his security for the debt and that, "Equity requires that subsequent events such as payment of the underlying debt not be ignored when the court distributes the insurance proceeds." Id. at 1125 quoting from Calvert Fire Insurance Co. v. Environs Development Co., 601 F.2d 851, 856 (5th Cir.1979) (diversity case under Georgia law). The district court resolved the issue in favor of the Smigiels, under the rationale behind the New York Rule:

[A] fire insurance policy is a contract to insure against fire loss, and its premiums are assumed to represent the fair equivalent of the obligation contracted for by the insurer without knowledge of the existence of collateral remedies.

Record Vol. 1., p. 190 quoting from Rutherford, 164 So.2d at 214. The court concluded that the Smigiels could recover "whatever expenses were necessary to restore the collateral to a value equal to the amount of the unpaid purchase price at the time of the fire," (Record Vol. I., p. 190) and denied Aetna's motion for summary judgment.

When the case was called for trial, the parties announced that they had reached a settlement. The settlement was memorialized by a written stipulation which provided that: (1) the damages would be fixed at the amount of the original estimate, $99,021.35; (2) that the court would retain jurisdiction to award costs, attorneys' fees and interest; and, (3) that the defendants would reserve the right to appeal the denial of summary judgment.

The Smigiels moved for an award of prejudgment interest. Under the terms of the policy, the insurance proceeds were due within 60 days from the submission of proof of loss forms. The Smigiels submitted their plain-paper-proof on November 13, 1981. Consequently, the district judge fixed the due date at January 12, 1982. The court held that the amount of the stipulated damages was due and owing from that date. Consequently, he awarded $25,163.81 in prejudgment interest. On the due date, the Smigiels' potential liability for payments owed under the original agreement far exceeded the $99,021.35 that Aetna had offered Smith many months before.

On appeal, Aetna argues that the district court erred in: (1) failing to apply the equitable principle of unjust enrichment to deny plaintiff's claim and (2) in awarding prejudgment interest as of January 12, 1982, rather than April 12, 1984, the date of settlement. In its reply brief Aetna also urges certification of the unjust enrichment issue to the Supreme Court of Florida under Fla.R.App.P. 9.030(a)(2)(C) on the grounds that the authority relied on by the district court is over 20 years old and comes from an intermediate appellate court rather than the highest court of the state. Aetna further asserts that the conclusive resolution of the unjust enrichment issue is of great importance to the insurance industry.

The decision whether to certify a question of state law to a state supreme court is committed to this court's discretion, Lehman Brothers v. Schein, 416 U.S. 386, 390-91, 94 S.Ct. 1741, 1743-44, 40 L.Ed.2d 215 (1974). In addition to the usual considerations, see generally, Florida v. Exxon Corp., 526 F.2d 266, 274-75 (5th Cir.1976), this court is struck by an amazing irony. Aetna, which...