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    Allstate Insurance Co. v. A.A. McNamara & Sons, Inc., and Arthur McNamara, 1 F.3d 133, 2d Cir. (1993)

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    This summary provides the essential information from the document in 3 sentences: This document discusses an appeal from a declaratory judgment in favor of Allstate Insurance Company regarding a property insurance policy it had issued to Robert Priga. Priga made material misrepresentations to Allstate about residing at the insured property, which voided the policy. The court held that Arthur McNamara, who was assigned Priga's insurance claim, took the assignment subject to the defenses available to Allstate that arose before Allstate received notice of the assignment, namely Priga's material misrepresentation. Therefore, McNamara could not recover on the insurance claim.

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    Allstate Insurance Co. v. A.A. McNamara & Sons, Inc., and Arthur McNamara, 1 F.3d 133, 2d Cir. (1993)

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    This summary provides the essential information from the document in 3 sentences: This document discusses an appeal from a declaratory judgment in favor of Allstate Insurance Company regarding a property insurance policy it had issued to Robert Priga. Priga made material misrepresentations to Allstate about residing at the insured property, which voided the policy. The court held that Arthur McNamara, who was assigned Priga's insurance claim, took the assignment subject to the defenses available to Allstate that arose before Allstate received notice of the assignment, namely Priga's material misrepresentation. Therefore, McNamara could not recover on the insurance claim.

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    Filed: 1993-08-03 Precedential Status: Precedential Citations: 1 F.3d 133 Docket: 1150

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    This summary provides the essential information from the document in 3 sentences: This document discusses an appeal from a declaratory judgment in favor of Allstate Insurance Company regarding a property insurance policy it had issued to Robert Priga. Priga made material misrepresentations to Allstate about residing at the insured property, which voided the policy. The court held that Arthur McNamara, who was assigned Priga's insurance claim, took the assignment subject to the defenses available to Allstate that arose before Allstate received notice of the assignment, namely Priga's material misrepresentation. Therefore, McNamara could not recover on the insurance claim.

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    84 views8 pages

    Allstate Insurance Co. v. A.A. McNamara & Sons, Inc., and Arthur McNamara, 1 F.3d 133, 2d Cir. (1993)

    Uploaded by

    Scribd Government Docs
    This summary provides the essential information from the document in 3 sentences: This document discusses an appeal from a declaratory judgment in favor of Allstate Insurance Company regarding a property insurance policy it had issued to Robert Priga. Priga made material misrepresentations to Allstate about residing at the insured property, which voided the policy. The court held that Arthur McNamara, who was assigned Priga's insurance claim, took the assignment subject to the defenses available to Allstate that arose before Allstate received notice of the assignment, namely Priga's material misrepresentation. Therefore, McNamara could not recover on the insurance claim.

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    of 8

    1 F.

    3d 133

    ALLSTATE INSURANCE CO., Plaintiff-Appellee, CrossAppellant,


    v.
    A.A. McNAMARA & SONS, INC., and Arthur McNamara,
    Defendants-Appellants, Cross-Appellees.
    Nos. 763, 1150, Dockets 92-7851, 92-9223.

    United States Court of Appeals,


    Second Circuit.
    Argued March 22, 1993.
    Decided Aug. 3, 1993.

    Peter A. Treffers, New Haven, CT, for appellants.


    Daniel F. Sullivan, Hartford, CT (John E. Tener, Charles D. Gill,
    Robinson & Cole, Hartford, CT, of counsel), for appellees.
    Before: MESKILL and PRATT, Circuit Judges, and POLLACK,* District
    Judge.
    MESKILL, Circuit Judge:

    This is an appeal and cross-appeal from a declaratory judgment of the United


    States District Court for the District of Connecticut, Eginton, J., dated June 22,
    1992, entered in favor of plaintiff-appellee Allstate Insurance Company
    (Allstate) and against defendant Robert Priga and defendants-appellants A.A.
    McNamara & Sons, Inc. and Arthur McNamara on their counterclaims for
    breach of contract. We affirm on the direct appeal and dismiss the cross-appeal.

    Appellants raise two arguments on appeal. They contend that the district court
    erred in concluding that, under Connecticut law, Arthur McNamara, the
    assignee, was precluded from recovering on the assigned insurance claim
    because he had failed to give notice to Allstate, the obligor, of the assignment
    before Robert Priga, the assignor, made a material misrepresentation to
    Allstate. Appellants also contend that the district court erred in concluding that,

    under Connecticut law, Allstate was not required to show that it was prejudiced
    by any lack of notice of the assignment.
    3

    Allstate argues that the district court correctly applied Connecticut law in
    holding that the assignment was subject to all defenses and equities available to
    Allstate that arose before it received notice of the assignment. Allstate also
    raises four additional arguments in support of the district court's holding that
    McNamara could not recover from Allstate. First, Allstate argues that the
    agreement between Priga and McNamara transferring Priga's potential recovery
    from Allstate fails as an assignment. Second, it contends that McNamara as an
    assignee of rights under a void contract received nothing from Priga. Next,
    Allstate argues that McNamara may not recover from it because Priga breached
    the insurance contract by failing to satisfy specified policy conditions. Finally,
    Allstate contends that it has superior equities to Priga and McNamara. Although
    many of these additional contentions appear to have merit, we need not address
    them because we hold that the district court correctly applied the relevant
    Connecticut law of assignment.

    Allstate also cross-appeals from the district court's decision. It argues that there
    was no evidence to support the district court's conclusion that Priga assigned
    his rights to his insurance claim to McNamara on September 21, 1987. Allstate
    also contends that there was no evidence from which the district court could
    conclude that Allstate was notified of an assignment from Priga to McNamara
    on October 2, 1987. Allstate is not aggrieved, however, by the judgment
    entered after these alleged errors. Consequently, Allstate has no standing to
    appeal. Therefore, we dismiss the cross-appeal.

    BACKGROUND
    5

    This appeal arises from an action commenced by Allstate pursuant to 28 U.S.C.


    Sec. 2201 seeking a declaratory judgment that a property insurance policy
    (Policy) it issued to Robert Priga was null and void as a result of material
    misrepresentations made by Priga to Allstate. The Policy was issued on April
    10, 1987 and covered a residence owned by Priga and the contents therein. The
    case was tried to the district court for four days. Judge Eginton made the
    following findings of fact.

    The Policy was titled a "Deluxe Homeowners Policy," and covered losses at
    replacement value of the property and its contents. The Policy provided that it
    would be void in the event of any intentional concealment or misrepresentation
    by Priga of any fact or circumstance material to his claim, before or after the
    loss. A condition of the Policy was that Priga maintain his residence at the

    insured property. Allstate customarily issues replacement value policies to


    cover residential buildings only when the policyholder resides in the building.
    7

    On September 4, 1987, the property suffered fire damage. On September 22,


    1987, Priga gave to an Allstate claims examiner a signed statement that Priga
    had lived almost exclusively at the property for fifteen years prior to the fire.
    Priga sold the property to appellant McNamara Inc. on September 21, 1987
    and, on that same date, assigned to appellant McNamara the claim for the
    dwelling fire loss. Priga notified Allstate of the assignment on October 2, 1987
    and authorized Allstate to make payment to McNamara Inc. on the dwelling fire
    loss claim arising from the damaged property. On December 15, 1987 Priga
    submitted a Proof of Loss to Allstate. Allstate employees examined Priga under
    oath on January 12, 1988 and Priga again asserted that he had been living at the
    property before the fire.

    On March 14, 1988 Allstate notified Priga that it considered the Policy void as
    a result of his material misrepresentations and that it would not pay any claims
    pursuant to it. At trial, Priga admitted that the statements made in his signed
    statement and repeated earlier under oath were false and that during the six
    months prior to the fire he had lived almost exclusively with his sister.

    The district court found that on September 22, 1987 in his signed statement
    Priga had made material misrepresentations to Allstate concerning his residence
    prior to the fire. The district court also found that the Proof of Loss submitted
    by Priga on December 15, 1987 did not reflect the true contents of the property
    at the time of the fire. 1 The court held that these misrepresentations rendered
    the Policy null and void. The district court also rejected McNamara's argument
    that he should be entitled to recover on the Policy as an assignee and, in equity,
    as an innocent purchaser. Applying Connecticut law, the court held that
    McNamara as an assignee of the property insurance claim was subject to the
    defenses that Allstate could assert against Priga because Allstate did not receive
    notice of the assignment until October 2, 1987, which was after Priga made a
    material misrepresentation to Allstate. The court concluded that McNamara
    took the assignment subject to Allstate's valid defense of material
    misrepresentation on the residency issue.

    10

    The district court entered a declaratory judgment in favor of Allstate and


    against Priga, McNamara & Sons, Inc. and McNamara on their counterclaims
    for breach of contract. McNamara & Sons, Inc. and McNamara appeal this
    judgment.

    DISCUSSION

    11

    Appellants do not challenge the court's conclusion that Priga misrepresented


    material facts to Allstate thereby voiding his insurance policy. Rather, they
    argue that the district court incorrectly interpreted the Connecticut law of
    assignment. Because we are unpersuaded by this contention, we need not
    consider alternative arguments for affirmance even though they may present
    other issues that could doom appellants' case.

    12

    We review de novo a district judge's interpretation of the law of the state in


    which he sits. See Salve Regina College v. Russell, 499 U.S. 225, 231-32, 111
    S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991); Leon's Bakery, Inc. v. Grinnell
    Corp., 990 F.2d 44, 48 (2d Cir.1993). Because we conclude that Judge Eginton
    properly interpreted Connecticut assignment law, we affirm the judgment.

    13

    Appellants first argue that the district court was incorrect when it stated that
    Connecticut law recognizes that an assignment is subject to all defenses and
    equities available to the obligor that arise before notice is given to the obligor
    of the assignment. They contend that, under Connecticut law, to preserve his
    right to recover on Priga's insurance claim McNamara did not have to give
    notice of the assignment to Allstate prior to the time Priga made material
    misrepresentations to Allstate.

    14

    The district court in reaching its decision relied on Bridgeport-City Trust Co. v.
    Niles-Bement-Pond Co., 128 Conn. 4, 20 A.2d 91 (1941). In that case, a
    company, after receiving loans from the plaintiff, assigned to the plaintiff
    accounts receivable due the company from the defendant-obligor. The
    Connecticut Supreme Court of Errors clearly stated: "Ordinarily the assignee of
    a chose in action takes it subject to equities and defenses which could have been
    set up against it in the hands of the assignor, provided they have arisen before
    receipt of notice of the assignment." 128 Conn. at 10, 20 A.2d at 94 (emphasis
    added). The Bridgeport-City Trust Co. Court then applied this principle,
    refusing to allow the obligor to assert a setoff claim against the amount claimed
    by the assignee because the setoff claim had not arisen until after the obligor
    had received notice of the assignment. The court repeatedly noted the
    importance of the obligor's receipt of notice of the assignment to the defenses
    available to the obligor. Id. at 10-11, 20 A.2d at 94-95.

    15

    To support their assertion that the district court erred in its reliance on
    Bridgeport-City Trust Co. in interpreting Connecticut law, appellants rely on a
    passage from American Jurisprudence and a Connecticut case cited therein
    decided by the Connecticut Supreme Court of Errors before it decided
    Bridgeport-City Trust Co. We are not persuaded by these authorities that the
    district court erred.

    16

    The American Jurisprudence passage to which appellants direct our attention


    indicates that courts disagree as to the effect of equities and defenses arising
    after the assignment of a nonnegotiable chose in action but before notice has
    been given to the debtor. See 6 Am.Jur.2d, Assignments Sec. 104 (1993). The
    passage cites in a footnote, inter alia, Hartford-Connecticut Trust Co. v.
    Riverside Trust Co., 123 Conn. 616, 197 A. 766 (1938), in support of the
    proposition that some courts limit the equities or defenses to which an assignee
    is subject, to those in existence at the time of the assignment.

    17

    In Hartford-Connecticut Trust Co., the Connecticut Supreme Court of Errors


    stated: "While not affected by defenses arising after the assignment, normally
    the assignee of a chose in action takes subject to all equities and defenses which
    could have been set up against the chose in the hands of the assignor at the time
    of the assignment." 123 Conn. at 626-27, 197 A. at 771. Appellants' reliance on
    this case to show that the district court erred in concluding that assignee
    McNamara had to give notice to Allstate prior to the time Priga made material
    misrepresentations to Allstate is misplaced. Hartford-Connecticut Trust Co.
    does not address the question of notice at issue in this appeal. Furthermore, this
    case predates Bridgeport-City Trust Co. by three years. Therefore, even if the
    holdings of these cases are inconsistent, the district court properly relied on the
    more recent decision of the Connecticut Supreme Court of Errors. See 1A
    James W. Moore et al., Moore's Federal Practice p 0.307, at 3072 n. 1 (2d ed.
    1993) (collecting cases that hold that where there are inconsistent decisions of a
    state court, federal courts usually apply the most recent decision).

    18

    Appellants also contend that the district court erred when it concluded that
    Connecticut law does not require Allstate to show prejudice from any lack of
    notice. Appellants rely on two decisions by the Connecticut Supreme Court of
    Errors, Ciezynski v. New Britain Transp. Co., 121 Conn. 36, 182 A. 661
    (1936), and Travelers Ins. Co. v. Mayo, 103 Conn. 341, 130 A. 379 (1925), for
    the proposition that the Connecticut court requires a showing of prejudice to an
    obligor from lack of notice of an assignment before it will defeat the claim of
    an assignee. Again, we find this argument unpersuasive because these decisions
    were issued prior to Bridgeport-City Trust Co. and in that opinion no
    requirement of prejudice was mentioned in the clear statement of the relevant
    state law.

    19

    The two decisions appellants cite are also factually distinguishable from the
    case at hand. The Ciezynski Court addressed the competing claims to a
    judgment obtained by the assignor of an attaching creditor of the assignor and
    an assignee when the creditor levied a garnishment on the judgment before the
    debtor received notice of the assignment. In Travelers Ins. Co., the court

    addressed the competing claims to the proceeds of a life insurance policy of an


    attaching creditor of an insured and the assignee of the insured's right to
    payment on the policy when no notice of the assignment had been given to the
    debtor insurance company. Neither Travelers Insurance Co. nor Ciezynski
    discussed the potential defenses an obligor can assert against an assignee.
    However, appellants argue that because the Bridgeport-City Trust Co. Court
    cited each of these decisions with approval directly following the passage relied
    on by the district court, see 128 Conn. at 10, 20 A.2d at 94, we should ignore
    the unambiguous language of Bridgeport-City Trust Co. and instead read these
    earlier cases as creating a rule that an obligor must show he was prejudiced by
    lack of notice of an assignment before an assignee's claim will be defeated.
    Appellants also argue that the Bridgeport-City Trust Co. case should be limited
    to its facts. We are not persuaded by either argument.
    20

    Appellants' attempts to circumvent the clear language in Bridgeport-City Trust


    Co. are to no avail. We are unwilling to second-guess a clear statement of state
    law by the Connecticut Supreme Court of Errors.2 Therefore, we conclude that
    the district court properly chose to follow the most recent statement of the
    relevant law by that court. Because we disagree with the arguments appellants
    make in their appeal, we need not consider the other four reasons urged by
    Allstate as appellee in support of affirmance.

    21

    Allstate also cross-appeals the district court's judgment arguing that there was
    no evidence to support the district court's findings with regard to the date of
    Priga's assignment of his rights to his insurance claim to McNamara and with
    regard to the date that Allstate was notified of the assignment. In its brief,
    Allstate states that we need only reach the arguments it raises on cross-appeal if
    we disagree with the five other grounds it urges for affirmance. Allstate
    assumes too much.

    22

    We previously have stated that "[i]n order to have standing to appeal, a party
    must be aggrieved by the judicial action from which it appeals." Great
    American Audio Corp. v. Metacom, Inc., 938 F.2d 16, 19 (2d Cir.1991) (per
    curiam). In its complaint, Allstate sought a declaratory judgment determining
    that the Policy was null and void and that Allstate had no further obligations to
    appellants or Priga pursuant to the Policy. The district court entered a
    declaratory judgment in Allstate's favor pursuant to the court's decision that the
    Policy was null and void. Allstate is not urging that we alter the judgment in
    any way, but rather that we alter the reasons underlying it. See Jarvis v.
    Nobel/Sysco Food Servs. Co., 985 F.2d 1419, 1426 n. 7 (10th Cir.1993). While
    Allstate "is entitled to urge that we affirm the district court's decision on any
    basis submitted to that court and supported by the record, including the basis

    that the court should have made findings favorable to it," Great American
    Audio Corp., 938 F.2d at 19, it is not aggrieved by the district court's judgment
    and therefore is not entitled to cross-appeal. Therefore, we dismiss Allstate's
    cross-appeal for lack of jurisdiction. See id.
    23

    Because we affirm the district court's decision for the reasons stated above, we
    need not address whether we could properly consider the seemingly
    meritorious arguments Allstate raises in its cross-appeal as additional grounds
    for affirmance.

    CONCLUSION
    24

    The district court did not err when it concluded that, under Connecticut law, to
    recover on Priga's policy McNamara had to give notice to Allstate of the
    assignment prior to the time Priga made a material misrepresentation to Allstate
    and that Allstate did not have to show it was prejudiced by any lack of notice of
    the assignment. Therefore, we affirm the judgment of the district court.

    25

    Because Allstate was not aggrieved by the district court's judgment, we dismiss
    its cross-appeal for lack of appellate jurisdiction.

    26

    The parties shall bear their own costs.

    Honorable Milton Pollack, United States District Judge for the Southern
    District of New York, sitting by designation

    Priga had claimed that the following items, among others, had been destroyed:
    two air conditioning units, a stereo, a microwave oven, wall-to-wall carpeting, a
    color television, a clothes dryer, approximately seventy pairs of pants,
    seventeen leather jackets and twenty pairs of athletic sneakers. The district
    court found that "many, if not all, of the items claimed in Priga's Proof of Loss
    ... were not on the property at the time of the fire."

    We note that our reliance on Bridgeport-City Trust Co. is strengthened because


    its statement of the law of assignment is in accord with the rule articulated in
    section 336(2) of the Restatement (Second) of Contracts. Section 336(2) states
    that "[t]he right of an assignee is subject to any defense or claim of the obligor
    which accrues before the obligor receives notification of the assignment, but
    not to defenses or claims which accrue thereafter except as stated in this Section
    or as provided by statute." Restatement (Second) of Contracts Sec. 336(2)

    (1981)

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