Suntrust Mortgage Inc. v. Aig United Guar. Corp.. A/K/A United Guar. Corp..

• Decision Date: 26 April 2011
• Docket Number: Civil Action No. 3:09cv529.
• Citation: 784 F.Supp.2d 600
• Parties: SUNTRUST MORTGAGE, INC., Plaintiff,v.AIG UNITED GUARANTY CORP. a/k/a United Guaranty Corp., et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

784 F.Supp.2d 600

SUNTRUST MORTGAGE, INC., Plaintiff,

v.AIG UNITED GUARANTY CORP. a/k/a United Guaranty Corp., et al., Defendants.

Civil Action No. 3:09cv529.

United States District Court, E.D. Virginia,Richmond Division.

April 26, 2011.

S. Miles Dumville, Alison Ross Wickizer Toepp, Curtis Gilbert Manchester, Travis Aaron Sabalewski, Reed Smith LLP, Jeremy Stephen Byrum, McGuirewoods LLP, Richmond, VA, Antony Bradley Klapper, Elizabeth Anne Reidy, Matthew Jay Schlesinger, Reed Smith LLP, Washington, DC, Edward Joseph Stein, Joshua Gold, Anderson Kill & Olick, New York, NY, Matthew Robertson Sheldon, Richard Dean Holzheimer, Jr., Reed Smith LLP, Falls Church, VA, for Plaintiff.Brian Christopher Baldrate, Jennifer Vosko Caughey, John Curry Millian, Gibson Dunn & Crutcher LLP, Washington, DC, Christopher Dean Dusseault, James Louis Zelenay, Jr., William Edward Wegner, Gibson Dunn & Crutcher LLP, Los Angeles, CA, John Buckley Warden, IV, Kevin Jermone Funk, Wyatt B. Durrette, Jr., Durrettecrump PLC, Richmond, VA, for Defendants.

MEMORANDUM OPINION

ROBERT E. PAYNE, Senior District Judge.

This matter is before the Court on SUNTRUST MORTGAGE, INC.'S MOTION FOR JUDGMENT ON THE PLEADINGS ON COUNTERCLAIM COUNT IV OR, IN THE ALTERNATIVE, RENEWED REQUEST FOR ENTRY OF SUMMARY JUDGMENT (Docket Nos. 352 and 354) and DEFENDANT UNITED GUARANTY RESIDENTIAL COMPANY OF NORTH CAROLINA'S RENEWED MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM COUNT IV (Docket No. 371). The Court heard oral argument on the motion on April 11, 2011, as part of the final pretrial conference in this action.¹

INTRODUCTION

For the reasons set forth below, DEFENDANT UNITED GUARANTY RESIDENTIAL COMPANY OF NORTH CAROLINA'S RENEWED MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM COUNT IV (Docket No. 371) will be granted and SUNTRUST MORTGAGE, INC.'S MOTION FOR JUDGMENT ON THE PLEADINGS ON COUNTERCLAIM COUNT IV OR, IN THE ALTERNATIVE, RENEWED REQUEST FOR ENTRY OF SUMMARY JUDGMENT (Docket Nos. 352 and 354) will be denied. The insurance policy clearly and unambiguously requires SunTrust (“ST”) to pay annual premiums to United Guaranty (“UG”) for the life of the insured loans, notwithstanding that UG's Maximum Cumulative Liability (“MCL”) for loss on those loans has been reached. The Court will issue a declaration requiring ST to pay such premiums in accordance with the insurance policy's terms, as construed by the Court in this opinion.

DISCUSSION

I. Procedural History

After ST filed this action alleging breach of contract, UG filed a Counterclaim,² Count IV of which alleged that, under Section 3.4 of the Master Policy, the mortgage insurance policy at issue in this action, ST was obligated to continue paying annual “Renewal Premiums” even after UG had paid the MCL on a given loan pool. UG sought a declaration to that effect. ³ The Court originally addressed the issue of summary judgment on UG's Count IV Counterclaim in ruling on DEFENDANT UNITED GUARANTY'S MOTION FOR SUMMARY JUDGMENT ON COUNT IV COUNTERCLAIM AGAINST PLAINTIFF SUNTRUST MORTGAGE (Docket No. 186). ST did not then move for summary judgment on Count IV of UG's Counterclaim. After hearing oral argument, the Court denied UG's motion for summary judgment, finding “genuine disputes of material fact.” ORDER dated Dec. 10, 2010 (Docket No. 310). On March 4, 2011, ST filed SUNTRUST MORTGAGE, INC.'S MOTION FOR JUDGMENT ON THE PLEADINGS ON COUNTERCLAIM COUNT IV OR, IN THE ALTERNATIVE, RENEWED REQUEST FOR ENTRY OF SUMMARY JUDGMENT (Docket Nos. 352 and 354). Believing upon further reflection that the Court might have erred in finding genuine disputes of material fact as to Count IV of the Counterclaim, the Court gave notice to the parties during a telephone conference on the record that it intended to revisit the summary judgment issue, and to hear oral argument thereon at the final pretrial conference scheduled for April 11, 2011.

II. Origin Of The Dispute—Section 3.4 Of The Master Policy

The parties are in agreement that the central issue in Count IV of UG's Counterclaim is the effect of Section 3.4 of the Master Policy. That section, which UG admits to drafting, is entitled “Renewal Premium,” and part (a) of that section states:

The insured's obligation for the payment of premium due, if any, after the payment of the appropriate initial premium shall continue for each Loan insured hereunder in accordance with the applicable premium plan elected by the Insured for each such Loan, notwithstanding the payment by the Company [UG] of Losses with respect to Loans insured hereunder during a Policy Year in an amount equal to the Maximum Cumulative Liability for such Policy Year, until....

Ex. A § 3.4(a) to UG's Count IV Counterclaim (Docket No. 47). Four separate subsections specifying possible events in the lives of the insured loans follow the word “until” in Section 4.3(a). The occurrence of any of those events would terminate the obligation to pay premiums. The parties agree that none of those events have occurred. The second, and final, lettered part to Section 4.3 is part (b). It provides in relevant part: “Any such renewal premium must be paid within forty-five (45) days after the anniversary (monthly, yearly otherwise, as the case may be) of the Effective Date of the Certificate.” The parties agree that previous renewal premiums for the loans at issue were paid on a yearly basis.

The parties agree that the “applicable premium plan” referred to in Section 3.4(a) of the Master Policy is set forth (for the vast majority of the loans here) in a document entitled “SunTrust Mortgage Agreement—Closed–End Purchase Money Seconds—Flow Business Risk Sharing Experienced Rating Plan” (“2005 Flow Plan”), dated October 17, 2005. In addition to setting forth the applicable premium plan, the 2005 Flow Plan, as well as its earlier incarnation, entitled “SunTrust Mortgage Agreement—Closed–End Purchase Money Seconds–Flow Business Risk Sharing Plan (“2004 Flow Plan”) ⁴, dated June 23, 2004, states, “Term of Cover: The term shall be life of loan and coverage is provided in accordance with the terms and conditions of the Residential Loan Reporting Program Master Insurance Policy [the Master Policy],” and it further states, “Insurance coverage shall exist until loan is paid in full, or term of insurance expires.” Exs. C and D to UG's Count IV Counterclaim (Docket No. 47).

While Section 3.4 speaks to any renewal premiums due for loans insured under the Master Policy, it is undisputed that Section 3.3 of the Master Policy obligates ST to pay an “Initial Premium” for such loans. ST admits that it paid an initial premium for all loans implicated by UG's Count IV Counterclaim in accordance with Section 3.3, and it does not here dispute having to do so.

III. Position Of The Parties

ST argues that Section 3.4 is unambiguous on its face and that it does not require ST to continue to pay renewal premiums on loans in any pool on which the MCL has been met. First, ST contends that the ordinary meaning of the term “renewal premium”—the title of Section 3.4—bars UG from claiming that renewal premiums are due annually for the life of the covered loans, notwithstanding that UG's MCL has been reached for such loans. According to ST, the term “Renewal Premium,” given its ordinary meaning, requires no premium to be paid if there is no insurance provided, and, of course, no insurance is provided once the MCL is reached. BRIEF IN SUPPORT OF SUNTRUST'S MOTION FOR JUDGMENT ON THE PLEADINGS (“ST Brief in Support”) (Docket No. 353) at 10.

In support of its argument, ST relies upon the Oxford English Dictionary's definition of “premium”: “The price for insurance protection for a specified period of exposure.” ST also cites 5 Couch on Insurance § 69:1, defining premium as “the consideration paid an insurer for undertaking to indemnify the insured against a specified peril.” ST harnesses Black's Law Dictionary, too, which defines “renewal” as “the act of renewing or reviving ... The substitution of a new right or obligation for another of the same nature.” Noting that Virginia courts have turned to such venerated definitional authorities when construing similarly undefined words in a contract, ST argues that the plain meaning of “premium” and “renewal” counsels that Section 3.4's reference in its title to “Renewal Premium” refers to something other than what, according to UG, is a mandatory-annual installment payment for the life of the insured loans.

Moving beyond dictionary definitions, ST argues that Section 3.4's operative language itself clearly shows that ST is not bound to pay renewal premiums for loans no longer eligible for future payouts from UG. ST bases this construction on the phrase “if any” because “[s]uch words indicate that SunTrust's obligation to pay an annual renewal premium after the initial premium is not absolute.” ST Brief in Support (Docket No. 353) at 13. The remainder of the section beginning with “notwithstanding ...” is superfluous, says ST, because one does not even reach that part of the provision if, as the preceding “if any” indicates, no renewal premium is due under the “applicable premium plan.” Id. At oral argument, ST argued that it is clear that no renewal premium is due under ST's premium plan because the document setting forth the premium plan, the 2005 Flow Plan, nowhere mentions renewal premiums being due after the MCL is reached. In further reliance on the “if any” clause, ST argues that placement of that clause before the “notwithstanding ...” clause is significant because “[i]f no renewal premium is due for a loan, one does not reach [that clause],” and “no ‘premium’ is due to ‘renew’ coverage on the subject loans, because no insurance coverage is being renewed.” Id. For these reasons, ST claims that Section 3.4 clearly does not require ST to continue to pay renewal premiums on loans after the MCL has been reached for such loans.

Alternatively, as a fallback position, ST argues that, even if ...