IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________

m 99-60563

Summary Calendar

_______________

ST. PAUL FIRE & MARINE INSURANCE COMPANY,

Plaintiff-Appellee,

VERSUS

STATE VOLUNTEER MUTUAL INSURANCE COMPANY,

Defendant-Appellant.

_________________________

Appeal from the United States District Court

for the Northern District of Mississippi

(2:97-CV-47)

_________________________

April 5, 2000

Before SMITH, BARKSDALE, and 

PARKER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:*

State Volunteer Mutual Insurance

Company (“State Volunteer”) appeals a

summaryjudgment directing it to share liability

with St. Paul Fire & Marine Insurance

Company(“St. Paul”) for a claimmade against

an insured who had been, at the relevant time,

putatively covered by both companies. State

Volunteer claims that the district court lacked

jurisdiction and erred in its application of

Mississippi's parol evidence rule and doctrine

of equitable subrogation. Finding no

reversible error, we affirm.

I.

Lance Whaley is an obstetrician and

gynecologist who contracted with St. Paul for

the purchase ofmedicalmalpractice insurance.

He contracted with State Volunteer for

liability insurance, effective January 1,

retroactive to 1986. 

Whaley delivered an infant named Morgan

 

*

 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.
2

Fletcher. After complications arose as a part

of the delivery process, an attorney

representing Morgan and the Fletcher family

requested hospital records relevant to

Whaley’s delivery of Morgan, and soon

thereafter requested that Whaley put his

insurance carrier on notice of a claim by the

Fletchers. Fletcher informed St. Paul of the

request for information and informed both

insurers of the demand letter. 

State Volunteer suggested to Whaley that

he take up the matter with St. Paul. St. Paul,

not aware of the State Volunteer contract or

the contact between Whaley and State

Volunteer, undertook a defense ofWhaley and

ultimately settled the claims.

After the settlement checks had been

issued, but before consummation of the

settlement, St. Pauldiscovered the existence of

Whaley’s policy of insurance with State

Volunteer. St. Paul promptly contacted State

Volunteer and requested contribution from

State Volunteer of one-half of the settlement

amount and the cost of defense. 

State Volunteer declined. It argued, and

Whaley agreed in affidavit testimony to the

district court, that it had been informed of the

pending Fletcher litigation when it negotiated

coverage withWhaley, but had specificallyand

explicitly agreed with Whaley to exclude the

Fletcher incident from its coverage. Neither

Whaley nor State Volunteer, however, could

provide the court with a contract or an

addendum thereto that memorialized this

agreement.1 

The district court held that St. Paul had

been subrogated to the rights ofWhaley by the

doctrine of equitable subrogation, that this put

St. Paul in the position of a party to the

liability insurance contract between Whaley

and State Volunteer, and that under

Mississippi contract law, State Volunteer

should be held liable for half of the paid

Fletcher claim.

II.

St. Paul’s contract with Whaley included a

subrogation clause stating that

[a]ny person protected under this policy

may be able to recover all or part of a

loss from someone other than us.

Because of this, each protected person

must do all that’s possible after a loss to

preserve any right of recovery available.

If we make a payment under this policy

that right of recovery will belong to us.

If we recover more than we’re paid, the

excess will belong to the person who

had the loss. But we’ll deduct our

recovery expenses first.

Under less complex circumstances, this

clause, by itself, would have provided St. Paul

contractual subrogation to the position of

Whaley as against State Volunteer. State

Volunteer’s contract with Whaley, though,

contains an anti-assignment clause, declaring

that “[a]ssignment of interest under this policy

shall not bind the Company until its consent is

endorsed hereon.” The district court

considered the possibility, without explicitly

deciding the issue, that State Volunteer’s antiassignment clause invalidated St. Paul's

subrogation clause. 

We assume arguendo that the antiassignment clause does defeat contractual

subrogation. We then, like the district court,

look to the possibility of equitable

subrogation. 

The equitable doctrine of subrogation

applies whenever any person, other than

a mere volunteer, pays a debt or demand

which in equity and good conscience

should have been paid by another, or

where one finds it necessary for his own

protection to pay the debt for which

another is liable. 

 

1 State Volunteer notes in its brief that its

“policy is not part of the Record on Appeal, but

counsel will be taking steps to provide a[] policy to

assist the Court in its determination.” It did not.

We can only assume, therefore, that the

“specimen” policy included in the appellate record

replicatesthewritten contract which bound Whaley

and State Volunteer.
3

First Nat’l Bank v. Huff, 441 So. 2d 1317,

1319 (Miss. 1983). The district court, in its

discretion, found equitable subrogation to

apply in this instance. 

We agree. In First National, a bank had

erroneously canceled a deed of trust between

two of its customers. Eventually, following

the debtor’s death, the debtor’s estate stopped

paying on the deed in response to the fact that

the creditor had not filed with the estate. The

bank was obliged to pay the creditor, but then

wished to collect that payment from the

debtor. The courts of Mississippi allowed

collection under the equitable subrogation

doctrine. See id. at 1317-20.

The facts here are similar. St. Paul took

responsibility for Whaley’s liability under the

insurance contract, finding out only at the end

of the settlement process that State Volunteer

might also be responsible for the liability.

Whaley had granted St. Paul the right to stand

in Whaley’s shoes in any circumstances in

which another party might be wholly or partly

liable for payments made by St. Paul on

Whaley’s behalf, and Whaley had promised to

“do all that’s possible after a loss to preserve

any right of recovery.”

Hence, Whaley was in good faith bound to

St. Paul to attempt to collect from State

Volunteer, and St. Paul should in equity have

recovered half of its expenditure in the

Fletcher case. While the anti-assignment term

may have defeated that right at law, the district

court did not abuse its discretion by

determining that equity requires that St. Paul

be placed in Whaley’sshoesin order to collect

from State Volunteer.

III.

State Volunteer states two primary

arguments against this understanding. First, it

contends that the district court erred in failing

to consider its proffered parol evidence that

the insurance contract between Whaley and

State Volunteer had been intended to exclude

any liability for the Fletcher event. Second, it

avers that St. Paul should be estopped from

collecting from State Volunteer because it did

not allow State Volunteer to negotiate with

the Fletchers toward the eventual settlement.

With regard to the issue of parol evidence,

State Volunteer does successfully direct this

court to an error by the district court. In

Mississippi, the parol evidence rule limits the

introduction of extrinsic evidence to elucidate

the real meaning of a contract only when the

partiesto the dispute are also the partiesto the

contract. 

The parol evidence rule provides that

when the language of a contract is clear

and unambiguous, parol testimony is

inadmissible to contradict the written

language. However, more importantly,

this Court has also held that this Court

has adopted the general rule that the

parol evidence rule applies only to

controversies between parties to the

agreement. In the case sub judice, the

“agreement” in question isthe insurance

policy, and the insurance company is not

a party in this controversy. Therefore,

this Court holds that the evidence

received by the Court was properly

admitted and properly considered. 

Sullivan v. Estate of J.C. Eason (In re Eason),

558 So. 2d 830, 832 (Miss. 1990) (citing

Smith v. Falke, 474 So. 2d 1044, 1046 (Miss.

1985)) (internal quotation marks omitted). 

This passage illustrates the error of the

district court’s assertion that parol evidence is

not admissible when a non-party to the

contract wishes an interpretation of the

contract unless the contract is ambiguous.

Rather, in Mississippi, the parol evidence rule

functions only when the parties to a contract

seek interpretation thereof, and thenonlywhen

that contract is unambiguous on its face. 

The error is of no help to State Volunteer,

however. As we have said, St. Paul, by the

efforts of the doctrine of equitable

subrogation, stands in Whaley’s shoes:

Subrogation has been defined as the

substitution of one person in place of

another, whether as a creditor or as a

possessor of any rightful claimso that he
4

who issubstituted succeedsto the rights

of the other in relation to the debt or

claim, and its rights, remedies, or

securities.

First National, 441 So. 2d at 1319 (internal

quotation marks omitted). 

For purposes ofthislitigation, therefore, St.

Paul is no stranger to the contract, but is the

representative of one of the contracting

parties. As a result, State Volunteer may not

enter into the record parol evidence of the

special intent of the parties (here, the intent

not to cover the Fletcher event), because the

contract unambiguously failed even to allude

to such an exception. State Volunteer is

therefore bound by the unambiguous terms of

the contract.

This “stepping into the shoes of” Whaley

also defeats State Volunteer’s argument that

the district court lacked jurisdiction. State

Volunteer argued that because there was no

privity of contract between St. Paul and State

Volunteer, St. Paul had no standing to bring an

action against it. Because subrogation inserts

St. Paul into the position of Whaley, however,

proper contract jurisdiction exists.

State Volunteer also argues that it should

be protected by the doctrine of waiver,

estoppel or laches from application of

equitable subrogation. The district court dealt

with this argument expeditiously but

sufficiently. We simply point out that (1) State

Volunteer enjoyed early notification that the

Fletcher affair was reaching the crisis stage,

and responded by referring Whaley to St.

Paul's without guaranteeing its own lack of

liability or communicating that purported lack

of liability to St. Paul at an early stage of the

affair; (2) State Volunteer is charged with

knowing that it had not manifested in any

writing the understanding withWhaleythat the

Fletcher affair would not be covered by the

Whaley/State Volunteer contract; (3) State

Volunteer knew from Whaley’s call as crisis

approached that at least Whaley did not fully

comprehend that State Volunteer had accepted

no responsibility for the Fletcher affair; and

(4) St. Paul did not know of the Whaley/State

Volunteer contract until the eleventh hour of

negotiationSSafter it had already written a

check to Fletcher. Under these circumstances,

we cannot see that the district court abused its

discretion in denying State Volunteer the

solace of these equitable defenses. 

AFFIRMED.