Turner v. Transport Intl Pool ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS July 2, 2004
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
_____________________ Clerk
No. 03-60441
_____________________
MARTIN TURNER, Etc.; ET AL.,
Plaintiffs,
MARTIN TURNER, Individually and Representative of Syndicates
MEB861, WHS2, COX 590, TMH 625, COP1036, RCT 483, WTK457,
Wurttembergische Versicherung AG, and Terra Nova Insurance
Company Limited,
Plaintiff - Appellant-Cross-Appellee,
versus
TRANSPORT INTERNATIONAL POOL INC.; ET AL.,
Defendants,
versus
TRAVELERS CASUALTY & SURETY COMPANY,
Garnishee - Appellee-Cross-Appellant.
__________________________________________________________________
Appeal from the United States District Court
for the Southern District of Mississippi, Biloxi
USDC No. 1:99-CV-17
_________________________________________________________________
Before JOLLY, JONES, and PRADO, Circuit Judges.
PER CURIAM:*
This appeal presents a dispute over insurance coverage in a
commercial general liability policy owned by Mississippi Design &
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
Development, Inc. ("MDD"). We begin with a recitation of the
background facts.
I
MDD was sued by the Carlo Corporation in federal court, for
damages to Carlo’s slot machines. Carlo contended that MDD had
failed properly and adequately to inspect the trailers in which
Carlo’s slot machines were to be transported and stored, with the
result -- at some point either in transportation or storage or both
-- that water entered the trailers, thereby damaging the
water-sensitive slot machines. The complaint was later amended to
substitute as plaintiff, Martin Turner, Carlo’s subrogated insurer
who had compensated Carlo for its losses. MDD notified its
insurer, Travelers, of the suit and requested that Travelers
provide MDD with a defense and indemnification. On August 3, 1998,
MDD received a letter from Travelers denying a defense and
indemnification based on a "sale, storage or safekeeping" exclusion
in the policy -- obviously contending that the damage to the
machines occurred during storage, not during transportation, which
the policy covered.
On June 25, 2001, MDD and Turner entered into a consent
judgment, in favor of Turner and against MDD for $630,000. As part
of the consent judgment, the parties entered into a covenant not to
execute, under which Turner agreed not to enforce the judgment
against MDD; in turn, MDD assigned its right to recover under the
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Travelers policy to Turner.1 Accordingly, the consent judgment was
entered against MDD on June 27, 2001. On February 5, 2002, Turner
filed a Suggestion of Writ of Garnishment in federal court against
Travelers, seeking to recover the proceeds of MDD’s insurance
policy. The district court, ruling against Turner, granted
Travelers’ motion for summary judgment, concluding that Travelers
did not breach its duty to defend MDD and therefore could not be
held liable under the consent judgment. Both parties timely filed
notices of appeal: Turner appeals the district court’s grant of
summary judgment, holding that Travelers did not breach its
contractual duty to defend; Travelers cross-appeals, arguing that
the district court erred in granting Turner’s motion for leave to
file a written contest, that Turner’s claims are time-barred, and
that there was no “occurrence” under the terms of the policy.
This court reviews a district court’s grant of summary
judgment de novo and considers the same criteria that the district
court relied upon when deciding the motion. Mongrue v. Monsanto
Co., 249 F.3d 422, 428 (5th Cir. 2001).
II
In its original briefing, Travelers argues with only one
sentence that the Writ of Garnishment in this case is void under
Mississippi law because it was never enrolled. See Buckley v.
1
As MDD’s assignee, Turner can obtain only those rights that
MDD could have itself asserted against Travelers. Ind. Lumberman’s
Mut. Ins. Co. v. Curtis Mathes Mfg. Co., 456 So. 2d 750, 754 (Miss.
1984).
3
Personnel Support Systems, Inc., 852 So. 2d 648 (Miss. 2003);
Estelle v. Robinson, 805 So. 2d 623 (Miss. App. 2002).2 This
argument is waived as inadequately briefed. See FED. R. APP. P.
28(a)(9)(A). Moreover, Travelers’ attempt to present this
contention more fully on the eve of oral argument, styled as a
motion to dismiss, does not save it. Cousin v. Trans Union Corp.,
246 F.3d 359, 373 n.22 (5th Cir. 2001) (stating that issues not
raised and argued in a party’s initial brief are normally waived on
appeal). Moreover, this argument is also waived because it appears
that it was never presented to the district court. See Stewart
Glass & Mirror, Inc. v. U.S. Auto Glass Discount Centers, Inc., 200
F.3d 307, 316-17 (5th Cir. 2000).3
2
We note that Turner has now enrolled the judgment; this fact,
however, does not affect the disposition of this appeal.
3
We also note that application of FED. R. CIV. P. 69(a) is not
jurisdictional by virtue of its incorporating Mississippi execution
practice and procedure. Even if a Mississippi court would lack
subject matter jurisdiction to take any action with regard to an
unenrolled judgment, see Buckley, 852 So. 2d at 650-52, the
incorporation of this Mississippi rule under FED. R. CIV. P. 69(a)
does not deprive this court of jurisdiction. See FED. R. CIV. P. 82
(stating that the Federal Rules of Civil Procedure, including Rule
69(a), “shall not be construed to extend or limit the jurisdiction
of the United States district courts”); 14 JAMES WM. MOORE ET AL,
MOORE’S FEDERAL PRACTICE § 82.02 (3d ed. 2003) (stating that the Rules
do not “affect the federal courts’ subject matter jurisdiction”;
instead “they are concerned exclusively with the fair and efficient
administration of justice in the federal courts”).
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III
Having determined that Travelers waived its argument regarding
the effect of Turner’s failure to enroll the Writ of Garnishment --
and that we have jurisdiction over this case -- we now turn to
address Travelers’ cross-appeals.
Travelers cross-appeals the district court’s decision granting
Turner’s motion for leave to file a written contest, arguing that
the motion was untimely. Once again we are required by FED. R. CIV.
P. 69(a) to apply Mississippi procedural rules. Mississippi law
provides that:
If the plaintiff believes that the answer of
the garnishee is untrue, or that it is not a
full discovery as to the debt due by the
garnishee, or as to the property in his
possession belonging to the defendant, he
shall, at the term when the answer is filed,
unless the court grant further time, contest
the same, in writing, specifying in what
particular he believes the answer to be
incorrect.
MISS. CODE ANN. § 11-35-45. The first problem with Travelers’
argument is that the statute requires that objections be filed
within the court term when the district courts in Mississippi have
no terms but continually are “in session”. See S.D. MISS. LOCAL RULE
77.1(A) (providing that “Court Always Open. There are no terms of
court in the United States district courts of Mississippi”).
Second, the Mississippi statute allows the court to grant Turner
“further time” to file his answer. Third, the Mississippi Supreme
Court has overlooked the rigid requirements of this statute and
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allowed the case to proceed despite “the lack of formal pleading.”
State Farm Mut. Auto. Ins. Co. v. Eakins, 748 So. 2d 765, 768 n.2
(Miss. 1999).
Travelers also argues that Turner’s claim is time barred by
Mississippi’s three-year statute of limitations. See MISS. CODE ANN.
§ 15-1-49. This argument confuses the nature of the claim at issue
and is thus misplaced. This lawsuit is based upon Travelers’
breach of its duty to indemnify MDD, not its duty to defend. Under
the terms of the policy Travelers agreed to pay MDD “those sums
that [MDD] becomes legally obligated to pay” and Turner’s claim
accrued when MDD became legally obligated to pay -- upon the entry
of the final consent judgment. Owens-Illinois, Inc. v. Edwards,
573 So. 2d 704, 706 (Miss. 1990) (stating that in Mississippi, a
cause of action accrues when “it comes into existence as an
enforceable claim; that is, when the right to sue becomes vested”).
Thus, the cause of action accrued on June 27, 2001 and this
lawsuit, filed on February 5, 2002, is timely.4
IV
We finally turn to evaluate the district court’s grant of
summary judgment in favor of Travelers, which dismissed Turner’s
complaint. The district court relied on the “sale, storage or
safekeeping” exclusion in the policy to hold that Travelers had no
4
We do not address Travelers’ argument, raised for the first
time on appeal, that there was no “occurrence” as required by the
policy. See Stewart Glass & Mirror, 200 F.3d at 316-17.
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duty to defend. We find that the district court’s grant of summary
judgment was error and therefore we REVERSE.
Under Mississippi law, “unjustifiably denying liability or
breaching a duty to defend will preclude an insurer from relying on
policy provisions that deny coverage.” Jones v. S. Marine &
Aviation Underwriters, Inc., 888 F.2d 358, 362 (5th Cir. 1989).
Thus, we must decide whether Travelers’ refusal to defend MDD was
“unjustifiable”; if it were, Travelers is precluded from relying on
the "sale, storage or safekeeping" exclusion.
Mississippi cases have decided that a “liability insurance
company has an absolute duty to defend a complaint which contains
allegations covered by the language of the policy; it clearly has
no duty to defend a claim outside the coverage of the policy.”
Sennett v. United States Fidelity and Guar. Co., 757 So. 2d 206, 212
(Miss. 2000) (emphasis added) (quoting Moeller v. American Guar. &
Liab. Ins. Co., 697 So. 2d 400, 403 (Miss. 1997)); see also United
States Fidelity & Guar. Co. v. OmniBank, 812 So. 2d 196, 200 (Miss.
2002). Consequently, “the obligation of a liability insurer [to
defend] is to be determined by the allegations in the complaint” as
applied to the policy language. Sennett, 757 So. 2d at 212 (quoting
Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So. 2d 400, 403
(Miss. 1997). Finally, any doubt with regard to an insurer’s
defense obligation is resolved in favor of the insured. Liberty
Mut. Fire Ins. Co. v. Canal Ins. Co., 177 F.3d 326, 331 (5th Cir.
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1999); see also Moeller v. Am. Guar. & Liab. Ins. Co., 707 So. 2d
1062, 1069 (Miss. 1996) (stating that “the insurance carrier has a
contractual duty to furnish a legal defense, whether the claim
later proves to be meritorious or not”).
In the instant case, it is uncertain from the complaint before
us whether Travelers had a duty to defend; that is, the complaint
does not allege whether the damage to the slot machines took place
during transportation (requiring a defense) or storage (not
requiring a defense because of the exclusion). When we resolve
this uncertainty in favor of Turner, however, we must presume that
the damage occurred during transportation. Thus, Travelers’
reliance on the “sale, storage or safekeeping” is precluded and its
refusal to defend MDD is “unjustifiable”. Consequently, Travelers
is liable for the consent judgment entered against MDD.
For these reasons the district court’s grant of summary
judgment in favor of Travelers is REVERSED, and judgment is
RENDERED in favor of Turner.5
5
Turner has also filed a motion for sanctions against Travelers
under FED. R. APP. P. 38, 28 U.S.C. § 1927, and our inherent
authority to regulate the conduct of the parties and their
attorneys, see Chambers v. NASCO, Inc., 501 U.S. 32, 43-46 (1991).
Specifically, Turner complains that Travelers submitted
supplemental authorities under FED. R. APP. P. 28(j) and filed the
previously discussed motion to dismiss, supra § II, on the eve of
oral argument with the intent to thwart Turner’s preparations in
this case. Moreover, Turner argues that after oral argument,
Travelers again abused the 28(j) procedure by submitting additional
authorities amounting to a re-argument of its appeal.
Turner’s contentions have some merit. First, it is clear that
Travelers was aware of its primary argument in the motion to
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REVERSED and RENDERED.
dismiss when its original brief was filed in this case (Travelers’
original brief dedicated one line to arguing that the judgment was
void because it had not been enrolled). Thus, its attempt to
reassert and develop the issue on the eve of oral argument is most
reasonably explained by either bad faith or negligence. Second,
its letter filed after oral argument pursuant to Rule 28(j) was
stricken by this court as an attempt to re-brief the case.
While this case may present a situation where sanctions would
be appropriate, we also recognize the issues raised in Travelers
motion to dismiss could conceivably be construed as jurisdictional.
Furthermore, its failure adequately to brief the issue may be
attributable to negligence rather than bad faith. We will not
assume the worst, and accordingly Turner’s motion for sanctions is
DENIED.
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