Professional Documents
Culture Documents
Bird v. Centennial, 1st Cir. (1993)
Bird v. Centennial, 1st Cir. (1993)
Bird v. Centennial, 1st Cir. (1993)
L. Kahn, and Goldstein & Manello, P.C., were on brief for appellant
_______
_________________________
George C. Rockas, with whom Paul R. Devin and Peabody & Arno
_________________
______________
______________
were on brief for appellee.
____________________
December 1, 1993
____________________
____________________
*Of the District of New Hampshire, sitting by designation.
In this
appeal, plaintiff-
Centennial
defendant breached
Policies").
Insurance
two
After
Company
fidelity
careful
in favor of
on
insurance
consideration
arguments, we affirm.
I.
I.
__
BACKGROUND
his
defendantclaim that
policies
of
("the
plaintiff's
BACKGROUND
__________
Plaintiff is the general partner of fifteen limited
partnerships that
housing
are
operate residential
multi-family
The projects
subsidized to
Department
own and
varying
of Housing
degrees
and Urban
by
the
United
Development
States
("HUD").
To
Management
Asset
Company
("Capital")
Corporation ("Asset").
and/or
Management
the projects
The
owned 50% of
was the
the company's
president and
other 50%.
only directors of
-22
stock.
treasurer of
Panagako's
Janice
Panagako's duties
nature.
No
formal
were clerical
directors'
meetings
and secretarial
were
ever
in
held.
for the
It is
clear from the record that John Panagako had complete control
over both of these corporations.
Each
provision
Asset,
due
of
the
requiring the
management
managing
agreements
agent,
contained
i.e., Capital
a
or
employees.
fraudulent
or
dishonest
acts
committed
by
its
____________________
1. Plaintiff contends that the inclusion of this provision
was mandated by HUD "regulations."
However, the record does
not reflect, and we cannot locate, any HUD regulation which
__________
affirmatively requires managing agents of HUD-subsidized
properties to purchase fidelity bonds. Rather, it appears
that plaintiff's argument is premised upon (1) a provision of
the HUD Handbook,
4381.5 REV-1, which requires property
managers to obtain fidelity coverage for both principals of
the management entity and "all persons who participate
directly or indirectly in the management and maintenance of
the project and its assets, accounts and records"; and (2)
the affidavit of G. Richard Dunnells, former Deputy Assistant
Secretary for Housing Management at HUD, which states that
(Emphasis
supplied).
provision,
Capital
Apparently
and
Asset
provided
in
secured from
litigation.
coverage
response
for
to
this
defendant
the
the
"[l]oss
of
money,
. through
committed
by
__
collusion
with
any
any
___
fraudulent
of
__
the
___
others."
or
employees
_________
(Emphasis
dishonest act
acting
alone
supplied).
or
acts
or
The term
in
_______
factor, commission merchant, consignee,
contractor
or
agent
or
other
representative
of
the
same general
character.
(Emphasis
supplied).
directives
only
Importantly,
however,
despite
the
Capital and
Policies,
Asset
and (2)
were named
the terms of
as
insureds under
the Policies
the
excluded from
____________________
standard policy or policies against fire and such other
hazards as the Commissioner, upon the insurance of the
mortgage, may stipulate."
-44
coverage misapplications
by the
managing agents,
i.e., the
insureds, themselves.2
By February
that
funds.
1989, plaintiff
had become
concerned
agreements.
plaintiff
Subsequently,
terminated
plaintiff filed
the
management
state court
fiduciary
duty,
breach
of
for breach
contract,
conversion,
of
See Bird
___ ____
89-1713-C (Mass.
assessed at
July
1990,
plaintiff
initiated
the
instant
to collect as
Defendant
a third-party beneficiary
under the
district court
insured under
an assignment
____________________
2. Specifically, Exclusion A of the Policies provided:
"This insuring form does not apply . . . to loss due to any
fraudulent, dishonest or criminal act by any insured or a
partner therein, whether acting alone or in collusion with
others . . . ."
-55
Policies,
complaint
so
and
as
moved
to
jettison
direct beneficiary
for
leave
to
file
an
his third-party
amended
beneficiary
under
the Policies.
The
motion for
1992, defendant
under the
filed a
second motion
Policies because
the fraudulent
and
arguing
denying
coverage
conditional
under
defendant should be
the
policies.
He
the motion,
estopped from
also filed
____________________
3. We use the term "alter ego" as a shorthand way of
identifying any natural person whom the corporate insured
does not have "the right to govern and direct in the
performance of [his/her] service."
As noted previously,
under the terms of the Policies, such an alter ego is not
considered an employee of the corporate insured.
And,
because the Policies only cover fraudulent or dishonest acts
by
employees of the corporate insureds, fraudulent or
dishonest acts by an alter ego of the insureds are outside
the scope of coverage.
4.
are Unavailable.
Should
it
further
discovery
relevant
to
argument.
In
memorandum
summary
judgment.
Panagako was
Policies
dishonest
February 1993,
In so
acts.
did
See
___
newly-raised
the district
estoppel
court issued
court held
that John
not
doing, the
not an employee
therefore
his
cover
supra
_____
his
note 3.
that the
fraudulent
It
also
and/or
rejected
Finally,
It is from
Summary judgment
boilerplate of the
order
to
permits a
court to
determine whether
trial
is
actually required.'"
It
must
depositions, answers
file, together with
is no
genuine issue
"`pierce the
be
granted
when
to interrogatories,
"the
pleadings,
and admissions
976
on
material fact
and that
the
____________________
continuance to permit affidavits to be obtained or
depositions to be taken or discovery to be had or
may make such other order as is just.
-77
moving party is
Fed.
R. Civ.
entitled to a judgment as
P. 56(c).
summary judgment
Our review
motion is plenary.
a matter of law."
of the allowance
Levy v. FDIC,
____
____
of a
No. 92-
is
against
this
backdrop
that
we
evaluate
plaintiff's contentions.
III.
III.
____
DISCUSSION5
DISCUSSION5
___________
Plaintiff
appeal:
a
matter of
giving
essentially
law,
rise to
makes
three
on
that the
fraudulent
and dishonest
not committed
employee of the
insureds' alter
his
defendant should,
claim that
arguments
estopped
that the
court erred in
by an
committed by the
acts
a matter
in rejecting
of law,
be
and (3)
Rule 56(f)
We
___ __________________________
___________________
Ltd., No. 92-2415, slip op. at 2, n.1 (1st Cir. Sept. 28,
____
1993).
-88
The
attacking
bulk of
plaintiff's
not an employee,
primarily is carried
brief
is directed
at
was an
insureds.
First,
boundaries.
Second,
under
Massachusetts
and
ambiguity must be
law.
alternatively,
E.g.,
____
resolved in his
Massachusetts Bay
_________________
Transp. Auth. v. Allianz Ins. Co., Inc., 597 N.E.2d 439, 441
_____________
_______________________
(Mass.
1992).6
We
disagree
with
positions.
1.
1.
both
of
plaintiff's
______________________________
In addressing plaintiff's
Policies unambiguously
and/or
provide coverage
for the
fraudulent
by John Panagako,
we begin
____________________
6. Relying on a series of cases regarding corporate "veil
piercing," and defining the "alter ego defense" here at issue
as the mere defensive application of this veil piercing
doctrine, plaintiff also devotes several pages of his brief
to arguing that Massachusetts courts would not recognize the
defense.
Plaintiff's
argument
in
this
regard is
fundamentally flawed.
The alter ego defense asserted by
defendant is not a common law defense; rather, it is a
___
defense derived from the language of the Policies themselves.
___ ________ __ ___ ________ __________
As such, the common law tort cases relied upon by plaintiff
in his reverse veil piercing argument are inapposite to the
contract dispute before us.
-99
with
some general
contracts.
The
ground rules
for interpreting
construction of
language
insurance
in an
insurance
F.2d
118, 119
(1st
Cir. 1990)
Federal
_______
(collecting
we review de novo,
__ ____
Where there
we will
of
920 F.2d
considered
it
"according
contained in
at 119.
ambiguous
is no ambiguity in the
interpret
the words
to
The language
only
if
its
intention of the
employees is expressed
will be given effect.
of
parties
agreed
that, inter
_____
in the
performance
ordinary
J.I.
____
terms
"are
is
fairly
Id.
___
parties as to
who are
that intention
the
a contract
in a fidelity policy,
See 13
___
language at
its provisions."
see Falmouth
___ ________
46:25 at 33
Here,
only
those natural
to govern and
of
alia,
____
(1982).
[their]
service"
would
be
that term
we have said,
-1010
reveals that
and direction by
and
the
corporations.
He
clerical
secretarial
and
and
president
his wife
in
and
treasurer
Janice,
nature,
whose
were
of
both
duties were
the
only
two
does not
he premises his
determination
contentions:
right to govern
was not
fact that
challenge to the
that Panagako
(1)
dispute the
an
district court's
employee upon
two
the theoretical
him an employee
to
are not
covered by
to plaintiff's
first contention,
we
join those
and reject
and direct a
is sufficient to render
that actor
Hartford
________
-1111
562-63 (Ariz.
(4th
Cir. 1965);
see
___
F.2d
also, e.g.,
____ ____
650,
651-53
App.
F.2d 146,
Matter of World
________________
(5th
Cir.
1993)
a fidelity
employee
policy as
majority
excluding from
shareholder
the
who
definition of
dominated
his
American Diversified
____________________
(same); Three
_____
We think it
must be more
generally in
grounding in reality.
corporation's "right,"
Cf.
___
than an ephemeral
right inhering
rather, it must
have some
direct John
Accordingly, we
at
to those
In this
the right to
any credible
basis.
in which the
-1212
(quoting Cody v.
____
439 N.E.2d
it
sufficient
to
included
It is obvious
merely to
interpretation
to govern and
distinguish
the
that
we
employees
from those
non-
persons over
Accordingly, we so
____________________
7. Our
conclusion
also
is
supported
by
considerations. As the Fifth Circuit has observed:
policy
are limited
to those
of
the assignors.
See 17 Couch on
___
_________
63A:267 at 146 (1983) ("It must be recognized
Insurance 2d,
____________
that the assignee can receive no greater rights than those of
the assignor.").
-1313
read it.
Am., 465
___
it was
of a clause
understandable
in
(declining to
in an insurance
its
"usual
and
contract
ordinary
and alternative
argument, that
that
In making
not explain
ambiguous.
Nor
his alternative
how the
does
definition of
he
make
any
argument, plaintiff
the term
attempt
might be
either
to
treated
this very
definition as
unambiguous.
at 90-92;
at 566-67;
his
waived.
(1st Cir.)
without
argument
being
(issues adverted to
developed
e.g.,
____
651-53; California
__________
Accordingly,
See
___
See,
___
perfunctory,
we
waived
deem it
in a perfunctory
argumentation deemed
at 562.
manner and
on appeal),
In
sum, we
reject
plaintiff's
challenge to
the
district
erred
in
second
refusing,
argument,
as
a matter
that
the
of
law,
district
to
hold
upon his
at
the
time
the
Policies
were
issued.
See
___
from asserting
stipulated that
dominant shareholder
was
an
it (1)
employee
____________________
doing, he asserts that this fact will help to enlighten us as
to the meaning of these purportedly ambiguous terms.
See
___
Rodriguez-Abreu v. Chase Manhattan Bank, N.A., 986 F.2d 580,
_______________
__________________________
586 (1st Cir. 1993) (extrinsic evidence admissible to clarify
ambiguous contractual provisions).
Even if we were to assume arguendo the truth of
________
plaintiff's assertion, we do not see how such fact would tend
to clarify anything at issue in this litigation.
At most,
the "regulations" to which plaintiff draws our attention tend
to reinforce the perception that the Policies were not
written in accordance with the specifications of HUD and
paragraph 19 of the management agreements.
They do not,
___
however, shed light on what the parties intended when they
included the disputed terms in the Policies.
under
insured's
easily distinguishable
from
the present
situation,
we
believe
simpler
reason.
plaintiff
As
the
is proceeding
Allied's rights
district
as the
under the
court
assignee
Policies, he
is
noted,
because
of Capital's
and
subject to
any
assignors.
One
defense to
doctrine of "unclean
hands."
Capital
and
Allied
were
into a court of
liable
for
the
As
of
estoppel they
have failed
might have
asserted
because of their
against defendant
unclean hands.
would
Plaintiff, as
court's
refusal to
hold
defendant
estopped from
denying coverage.
C.
Should Plaintiff's Rule 56(f) Motion Have Been
C.
Should Plaintiff's Rule 56(f) Motion Have Been
________________________________________________________
Granted?
Granted?
________
-1616
issue
of
estoppel.
Once
again, his
argument
is without
merit.
Rule
56(f) offers an
opposing a
summary judgment
additional
time to marshal
opposition.'"
Mattoon
_______
"`escape hatch'" to
a party
requires
justify its
F.2d 1, 7
for failing to
Mattoon, 980
_______
F.2d at
requested discovery
Our
discovery earlier.
review of
an order
denying
abuse of discretion.
Id.
___
As we have stated, plaintiff's estoppel argument is
doomed by the fact that, as an assignee, plaintiff is subject
to defendant's unclean
reveals that
hands defense.
It therefore follows
Moreover,
the record
prevail as a matter
of law.
for discovery on
-1717
IV.
IV.
___
CONCLUSION
CONCLUSION
__________
For
and
denying
plaintiff's
Rule
additional discovery.
Affirmed.
Affirmed.
_________
Costs to appellee.
56(f)
motion
for
-1818