U.S. v. Fowler, ANDERSON-BLAKE-FAY

Citation913 F.2d 1382
Decision Date07 September 1990
Docket NumberNo. 89-35806,ANDERSON-BLAKE-FAY,89-35806
PartiesUNITED STATES of America, Plaintiff-counter-defendant/appellee, v. James S. FOWLER, Sr.; Halle W. Fowler, Defendant-counter-claim-third-party plaintiffs/appellants. James S. FOWLER, Jr.; Robyn Fowler, Third-party plaintiffs/appellants, v.INSURANCE COMPANY, INC., Third-party defendant/appellee.
CourtU.S. Court of Appeals — Ninth Circuit

R. Keith Roark, Roark, Donovan, Praggastis, Elkins and Phillips, Ketchum, Idaho, for defendants-counter-claim-third-party plaintiffs/appellants.

Paige Alan Parker, Imhoff and Lynch, Boise, Idaho, for third-party defendant/appellee.

Andrea M. Pogue, Asst. U.S. Atty., Boise, Idaho, for plaintiff-counter-defendant/appellee.

Appeal from the United States District Court for the District of Idaho.

Before HUG, D.W. NELSON and BRUNETTI, Circuit Judges.

OVERVIEW

D.W. NELSON, Circuit Judge:

The Fowlers, appellants in the instant case, suffered flood damage on their property. They had sought flood insurance for the property through appellee ABF, their insurance company, and ABF had applied for a policy from the government's National Flood Insurance Program. Although it was determined that the Fowlers were not eligible for the program, a policy was nevertheless issued and the government erroneously paid the Fowlers for their loss. Later, after an audit of the Flood Insurance Program, the erroneous payment was discovered and the government brought an action against the Fowlers to recover payment. The Fowlers brought a third-party complaint against ABF and counterclaimed against the United States on the basis of negligence. The district court granted summary judgment to ABF because the Fowlers had signed a liability release. The district court also granted summary judgment to the United States, finding that the government had not waived its right to reimbursement and was not estopped. The court dismissed the Fowlers' counterclaim because it fell within the misrepresentation exception under the Tort Claims Act. This appeal followed.

FACTUAL AND PROCEDURAL HISTORY

James S. Fowler, Sr., Halle W. Fowler, James S. Fowler, Jr., and Robyn Fowler (the Fowlers) owned adjacent property on the Snake River and Salmon Falls Creek in Hagerman, Idaho. On April 26, 1984 the Fowlers procured flood insurance for three buildings on the properties through Anderson-Blake-Fay Insurance Company (ABF). ABF applied for the policy from the United States' National Flood Insurance Program (NFIP or United States). Immediately afterward the Fowlers left for Alaska. Ten days later ABF determined that the address on the insurance application listed the incorrect county and that, in fact, the Fowlers' property was in a county that was ineligible for federal flood insurance. ABF sent three cancellation/nullification request forms to the NFIP indicating the true property location, explaining the mistake and stating that the property was not eligible for coverage. The NFIP returned the forms to ABF because, at the time they were submitted, no policy number had been assigned yet to the flood insurance applications. ABF did not resubmit the cancellation/nullification forms. ABF also did not contact the Fowlers on the phone or through the mail about the cancellation of their insurance. 1 The Fowlers returned from Alaska on May 11 or 12, 1984.

The Salmon Falls Creek flooded on May 16, 1984, damaging the property owned by James Fowler, Sr. and his wife. On that same day, James Fowler, Jr. called ABF and was informed that the property was not insured. The Fowlers retained an attorney who began negotiations with ABF. On May 21, 1984 ABF submitted two claims to the government. In processing the claims the NFIP assigned the two claims to separate claim examiners. One examiner correctly denied the smaller of the two claims because the property was in an ineligible county. On November 29, 1984 another examiner erroneously issued two checks totaling $23,237.86 to the Fowlers on the second claim.

On May 16, 1985 the Fowlers and ABF began negotiating over the claim rejected by the NFIP. On February 2, 1986 James Fowler, Sr., signed a release of all claims arising out of the flood against ABF in return for ABF's payment of $5,500.

On October 30, 1986 the Fowlers were notified by letter from the NFIP that an audit had revealed the mistaken payment and that the United States was demanding repayment of the $23,237.86. The Fowlers filed an action against ABF in state court alleging negligence, breach of contract, fraud and misrepresentation. After the Fowlers amended their complaint to add the Government as a co-defendant, the case was removed to federal court and consolidated with the Government's collection action against the Fowlers. In that collection action the Fowlers filed a third-party complaint against ABF repeating the same claims asserted in the state action. The Fowlers also filed a counterclaim against the United States seeking damages for negligence in processing and paying the flood damages. The district court granted summary judgment to the United States on its claim for reimbursement and on its motion to dismiss the counterclaim. The district court also granted summary judgment in favor of ABF on the Fowlers' third-party complaint. The disposition of these motions resolved all the issues in the case and the Fowlers then timely appealed to this court.

DISCUSSION
I. Standard of Review

A grant of summary judgment is reviewed de novo. Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). The appellate court must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir.1989).

II. United States
A. Reimbursement Claim

It is undisputed that the Fowlers' property was ineligible for NFIP coverage as a matter of law and that the United States erroneously paid the Fowlers for flood damage on their property. The Fowlers argue, however, that the United States is estopped from seeking reimbursement or, alternatively, has waived its right to reimbursement. We disagree and affirm the district court's order granting the United States' motion for summary judgment against the Fowlers on its claim for reimbursement of the flood insurance proceeds.

1. Equitable Estoppel

The Ninth Circuit "has held that 'where justice and fair play require it, estoppel will be applied against the government.' " Watkins v. United States Army, 875 F.2d 699, 706 (9th Cir.1989) (en banc) (quoting Johnson v. Williford, 682 F.2d 868, 871 (9th Cir.1982)). However, "the federal government 'may not be estopped on the same terms as any other litigant.' " Wagner v. Dir., Fed. Emergency Management Agency, 847 F.2d 515, 519 (9th Cir.1988) (quoting Heckler v. Community Health Servs., Inc., 467 U.S. 51, 60, 104 S.Ct. 2218, 2224, 81 L.Ed.2d 42 (1984)). Specifically, "claims for estoppel [against the government] cannot be entertained where public money is at stake." Office of Personnel Management v. Richmond, --- U.S. ----, 110 S.Ct. 2465, 2473, 110 L.Ed.2d 387 (1990). Because the Appropriations Clause of the Constitution, Art. I, Sec. 9, cl. 7, limited the payment of money from the Treasury to that authorized by statute, the Supreme Court in Richmond held that "judicial use of the equitable doctrine of estoppel cannot grant respondent a money remedy that Congress has not authorized." Id., 110 S.Ct. at 2472.

It is undisputed that the Fowlers' property was not eligible for flood insurance under the National Flood Insurance

                Act. 2   42 U.S.C. Secs. 4001-4128 (1989).  Thus, if we were to permit the Fowlers to estop the United States, we would be permitting them to retain public funds that Congress had not appropriated.  We have no authority to grant such an expenditure.  In this context, the United States cannot be estopped
                
2. Waiver

Appellants claim that the United States waived its right to reimbursement by voluntary payment of the claim. 3 They argue that the Court must rely on standard insurance law and contract principles to determine the waiver issue and that under this law voluntary payment of an insurance claim waives any right to reimbursement. The government contends that the general state doctrines of waiver are not applicable when the insurer is the United States because the agents in this case were acting outside their scope of authority which cannot bind the United States.

The Fowlers are correct that in suits interpreting a federal flood insurance policy, the appellate court "shall apply the 'traditional common-law technique of decision' by drawing upon standard insurance law principles." Brazil v. Giuffrida, 763 F.2d 1072, 1075 (9th Cir.1985) (quoting West v. Harris, 573 F.2d 873, 881 (5th Cir.1978)). However, whether the government has waived its right to reimbursement by paying the Fowlers is not a question involving interpretation of the provisions of an insurance policy, for which the court would look to standard insurance law provisions. Instead, in this case, the court is determining whether conduct of government agents that is contrary to law can bind the government; specifically, the court must decide whether agents can expand the coverage of an insurance program beyond Congress' mandate by providing benefits to an ineligible party. To determine this question the courts look to federal law rather than state insurance law. See, e.g., Community Health Services, 467 U.S. 51, 104 S.Ct. 2218 (applying federal law); Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 383 n. 1, 68 S.Ct. 1, 3 n. 1, 92 L.Ed. 10 (1947) ("[R]ules of law whereby private insurance companies are rendered liable for the acts of their...

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