## IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________



### m 99-60563

Summary Calendar

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### S T



### . P AUL 

### F IRE 

### & M ARINE 

### I NSURANCE 

### C OMPANY



### ,

Plaintiff-Appellee,

VERSUS



### S TATE 

### V OLUNTEER 

### M UTUAL 

### I NSURANCE 

### C OMPANY



### ,

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: *

S tate Volunteer Mutual Insurance

Company (“State Volunte er”) appeals a

summary judgment directing it to share liabilit y

with St. Pau l Fire & Marine Insurance

Company (“St. Paul”) for a claim made against an insured who had been, at the relevant time,

p utatively covered by both companies. State

Volunteer claims that the district court lacked

jurisdict io n 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 of medical malpractice insurance.

He contracted with State Volunteer for

liabilit y insurance, effective January 1,

retroacti ve to 1986.

Whaley delivered an infant named Morgan * Pursuant to 5 T H C IR

. R. 47.5, the court has

determined that this opinion should not be

p ublished and is not precedent except under th e

limited circumstances set forth in 5 T H C IR

. R.

47.5.4.2

Fletcher. After complications arose as a part

of t he delivery

process, an attorney

repre sent ing Morgan and the Fletcher family

requested hospital records relevant to

Whaley’s delivery of M o rgan, and soon

therea ft er requested that Whaley put his

insurance carrier on notice of a cla i m by the

F letchers. Fletcher informed St. Paul of t he

request for information and informed both

insurers of the demand letter.

State Volunteer suggested t o Whaley that

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

not aware of the State Vol unteer contract or

the contact between Whaley and State

Volunteer, undertook a defense of Whaley and

ultimately settled the claims.

After the settlement checks had been

issued, but before consummat ion of the

settlement, St. Paul discovered the existence of

Whaley’s po licy of insurance with State

Volunteer. St. Paul promptly contacted State

Volunteer and requested contribution from

State Volunteer of one-half of the s e ttlement

amount and the cost of defense.

State Volunteer de clined. It argued, and

Whaley agreed i n affidavit testimony to the

district court, that it had been informed of the

pending Fletcher litigation when it negotiated

coverage with Whaley, but had specifically and

explicitly agreed with Whaley to exc lude the

Fletcher incident from its coverage. Neither

Whaley nor State Volunteer , however, could

provide the court wi th a contract or an

addendum thereto t hat memorialized this

agreement. 1

The district court held that St. Paul had

been subrogated to the rights of Whaley by the

doctrine of equitable subrogation, that this put St. Paul in the position of a party to the

liabilit y 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 thi s, 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 w ill belong to us.

If we recover more than we’re paid, the

excess will belong to the person who

h ad the loss. But we’ll deduct o ur recovery expenses first.

Under less complex circumstances, this

clause, by itself, would have provided St. Paul

cont r actual subrogation to the position of

Wh aley as against State Volunteer. State

Volunteer’s contract with Whaley, though,

contains an anti-assignment cla u se, 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 possibili

t y, without explicitly

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

T h e equitable doctrine of subrogation

applies whenever any person, other than

a mere volunteer, pays a debt or demand

w h ich 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 Vo l unteer notes in its brief that its

“policy is not part of the Reco rd 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

replicates the written contract which bou nd Whaley

and State Volunteer.3

First Nat’l Bank v. Huff

, 441 So. 2d 1317,

1 319 (Miss. 1983). The district court, in it s discretion, found equi

t able subrogation to

apply in this instance.

We agr ee. In F irst National

, a bank had

erroneously canceled a deed of trust between

two of its custome rs. 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 paym ent from the

debtor. The courts of Mississippi allowed

collection under the equitable sub rogati on

doctrine. See id. at 1317-20.

The facts here a r e similar. St. Paul took

responsibility for Whaley’s liab ility 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 an y circumstances in

which another party might be wholly or partly

liable for pay ments made by St. Paul on

Whaley’s behalf, and Whaley had promised to

“do all that’s pos sible 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

recove red 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 discret ion by

de t ermining that equity requires that St. Paul

be placed in Whaley’s shoes in 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 con sider its proffered parol evidence that

the insurance contract be t ween 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 di rect thi s court to an error by the di stri ct court. In

Mississip pi, t he parol evidence rule limits the

introduction of extrinsic evidence to elucidate

the real mea n ing of a contract only when the

parties to the dispute are also the parties to the

contract.

The parol eviden c e rule provides that

when the language of a contract is clear

and unambiguous, parol testimony is

inadmissible t o contradi ct the wri tten language. However, more importantly,

this Court has also held that this Court

has ad opted the general rul e that the

parol evidence rule a p plies only to

controversies between parties to the

agreement. In the case s ub judice

, the

“agreement” in question is the insurance

policy, and the insurance company is not

a party in this controversy . Therefore,

this Court holds that t he evidence

rece i ved by the Court was properly

admitted and properly considered.

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

, 558 So. 2d 830, 832 (Mi ss. 1990) ( c iting

Smith v. Falke

, 474 So. 2d 1044, 1046 (Miss.

1985)) (internal quotation marks omitted).

This passage il lustrates the error of the

district court’s assertion that parol evidence is

not admissible w hen a non-party to the

contra ct 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 then only when

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 defin ed as the

substitution of

o ne person in place of

another, whether as a credit or or as a

possessor of any rightful claim so that he4

who is substituted succeeds to the rights

of th e ot her in relation to the debt or

claim, and its rights, rem edies, or

securities.

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

quotation marks omitted).

For purposes of this litigation, therefore, St.

Paul is no stranger to the contract, but is the

representative o f o ne of the contracting

parties. As a result, State Volunteer may not

enter into the record parol evid ence of the

special intent of

t he parties (here, the intent

not to cover the Fletcher event ), because the

contract unambiguously

failed even to allude

t o such an exception. State Volunteer is

therefore bound by the unambiguous terms of

the contract.

T his “stepping into the shoes of” Wh aley

also defeats S t ate Volunteer’s argument that

the district court lacked jurisdic t ion. 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 applicat ion of

equitable subrogation. The district court dealt

with this argument expedi ti ousl y but

sufficient ly. We simply point out that (1) State

Volunt eer enjoyed early notification that the

Fl et cher affair was reaching the crisis stage,

and responded by

referring Whaley to St.

Paul's wit hout guaranteeing its own lack of

liabilit y or communicating that purported lack

of liabilit y to St. Paul at an early sta ge of the

affair; (2) State Volunteer is charged with

knowing that it had not manifested in any

writing the understanding with Whaley that the

Fletc her affair would not be covered by the

Whaley/State Volunteer contract; (3) S tate

Volunteer knew from

Whaley’s call as crisis

approached that at le ast Whaley did not fully

compre hend that State Volunteer had accepted

no respo n sibilit

y for the Fletcher affair; and

(4) St. Paul did not know of the Whaley/State Volunteer contract un t il the eleventh hour of

negotiation 

### SS

aft er 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.