2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 8-31-2009 

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v. S N S E R V IC IN G C O R P O R A T IO N ; S N IN S U R A N C E C O M P A N Y , IN C .; S ECURI TY NATI ONA L M AST ER HOLDI NG COM P ANY , LL C; S E C U R IT Y N A T IO N A L M A S T E R M A N A G E R , L L C ; R O B IN P . A R K L E Y , II;

A LA SK A SEA BO A RD PA RT N ER S, LP; ALAS KA SE ABOARD I NVES TM ENT S , I NC.

____________ O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n sy lv a n ia ( D . C . N o. 05- cv- 05982) D i s t r i ctJ udge: H onor abl e A ni t a B . B r ody

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M ay28, 2009 B e f o re : F IS H E R , C H A G A R E S a n d C O W E N , C i r cui tJudges .

( Fi l ed: A ugus t31, 2009 )

____________ OPI NI ON O F THE COURT

____________I n r el evantpar t , t he pr om i s s orynot e pr ovi ded: 1 I f y ou r equi r e me t o, I w i l l i ns ur e the C ol l at er al agai ns tl os s . . . . A ny i ns ur ance pol i cyw i l l pr ovi de forpaym entof the i ns ur ance pr ocee ds t o y ou to th e e x te n t n e c e s s a ry to p a yth e a m o u n ts w h ic h I o w e u n d e r t h is n o te . I w i l l gi ve y ou anyi ns ur ance pol i cyora ce r t i fi cat e t o s how thatI have i t . I f I do notbuyand mai nt ai n t he r equi r ed i ns ur ance , ori f I do notpaythe p rem ium s, y o u m ay , if y o u ch o o se, do thes e thin g s fo r m e f o r m e [ sic]. If y ou do t hi s and I do notr ei m bur s e y ou forthe pr emi um s w i t hi n a s peci fi ed tim e , y o u m a ya d d th e u n p a id b a lan c e o f th e p re m iu m s to th e u n p a id bal ance of the Pr i nci pal A m ountof thi s not e. I n t hi s cas e, i nt er es tw i l l be 2 F IS H E R , C i r cui tJudge . J oi C apl en appe al s fr om t he D i s t r i ctC our t ’ s or der s ent er i ng s um m aryj udgm ent
a g a i n s th e r . W e wi l l a f f i r m. I. W e w r i t e exc l us i vel yfort he part i es , w ho ar e fa m i l i arw i t h t he fa ctual cont extand l egal hi s t or yof thi s cas e. T her efor e, w e w i l l s etfor t h onl ythos e fa ct s nece s s aryt o our analy si s. In M a rc h 1 9 9 3 , C a p len a n d h e r h u sb a n d , L a rry , ex e c u ted a p ro m iss o ryn o te in f a v o r o f M e llo n B a n k , s e c u re d b ya m o rt g a g e o n th e irh o m e in B lu e B e ll, P e n n s y lv a n ia . U ndert he t erm s of the not e and mor t gage, the C apl ens agr eed t o carr yhaza r d i ns ur ance on t he pr opert yand t o pr ovi de evi dence of i ns ur ance t o t he bank; i f theyfai l ed t o do s o, th e b a n k w a s a u th o riz e d to “ f o rc e p lac e ” in su ra n c e o n th e p ro p e rty– th a t is, to i ndepende nt l yobt ai n i ns ur ance and add the cos tof the pr emi um s t o t he pr i nci pal due
u n d e rt h e n o t e – i n o r d e rt o p r o t e c ti t s s e c u r i t y i n t e r e s ti n th e p r o p e r t y. 1char ged on the unpai d bal ance of thes e pr emi um s atthe r at e s how n on page

1 o f t his no t e, beg i nn i ng on t he d at e y ou paid the p rem i um s. I d ire c t all in su ra n c e c o m p a n ies p ro v id in g . . . ins u ra n c e o n re a l . . . p ro p e rty . . . in c o n n e c tio n w ith th is lo a n to p a yy o u a n ym o n e yo w e d to m e . . . . Y o u m a yu se a n ysu c h m o n e yto p a ya m o u n t [ sic ] w h ich I o w e u n d e r th is not e. A pp. 74. L i kew i s e, t he mort gage pr ovi ded: M o rt g ag o r sha ll k ee p the M o rt g ag ed P rop ertyinsu red ag ains t l o ss b yfire

. . . in s u c h a m o u n ts a s M o rtg a g e e sh a ll req u ire . . . . M o rtg a g o r sh a ll del i verw r i t t en evi dence of al l s uch i ns ur ance t o M or t gagee . If M o rtg a g o r f

a ils to o b tain a n d k e e p in f o rc e a n yre q u ire d in su ra n c e o r f a ils t o payt he pr emi um s on s uch i ns ur ance , M or t gagee ati t s s ol e opt i on m ay e lec t to d o so . In th e e v e n t o f lo ss , M o rtg a g o r sh a ll g iv e p ro m p t n o tice to t he I ns ur erand M or t gagee . M or t gagee ati t s opt i on m ayel ectt o m ake p ro o f o f lo s s if M o rt g a g o r d o e s n o t d o s o p ro m p tly . . . . [I ] ns ur ance pr ocee ds s hal l be appl i ed t o r es t or at i on orr epai rof the M or t gaged Pr oper t yort o r educt i on of the O bl i gat i on, as M or t gagee m ay det erm i ne i n i t s s ol e di s cr et i on. A pp. 67. 3 T he C apl ens eventual l ydefa ul t ed on the not e. O n J une 5, 2000, M el l on B ank in itia te d f

o re c lo s u re p ro c e e d in g s in th e C o u rt o f C o m m o n P le a s o f

M o n tg o m e ry C o u n ty. W hi l e thatact i on w as pendi ng, M el l on B ank s ol d t he not e and mor t gage t o A l as ka Seaboar d Par t ner s , L P ( A SP). A SP’s s ervi ci ng aff i l i at e, Secur i t yN at i onal Ser vi ci ng Corpo r a t i on ( SN SC) , t he n s e nta s e r i e s of l e t t e r s t o the Capl e ns , i nf ormi ng the m t ha tA SP h a d a c q u ire d th e ir lo a n a n d a sk in g th e m to p ro v id e p ro o f o f in su ra n c e . T h e C a p len s d id
no tres po nd t o these l et t ers .4

O n M ar ch 14, 2002, t he C our tof C om m on Pl eas ent er ed j udgm entagai ns tthe C apl ens i n t he amountof $116, 662. 38, pl us pos t - j udgm enti nt er es t . Soon aft erw ar ds , t he C a p len s a n d A S P e n ter e d in to a f o rb e a ra n c e a g re e m e n t, un d e r w h ich th e C a p len s a g a in agr eed, among ot hert hi ngs , t o pr ovi de pr oof of i ns ur ance on t hei rpr oper t y . W hen the C apl ens s t i l l di d nots uppl ypr oof of i ns ur ance , SN SC obt ai ned a f or ce- pl ace d i ns ur ance po l i cyun derw ri t t en at Lloy d’s. I n D ece m ber2003, SN SC canc el l ed i t s L l oy d’ s pol i cyand r epl ace d i tw i t h a pol i cy i s s ued bySecur i t yN at i onal I ns ur ance C om pany( SN I ) , a ca pt i ve i ns ur ance companyt hat p r o v i d e s f

o r c e - p l a c e d i n s u r a n c e t o Se c u r i t yNat i o n a l M a s t e rHol d i n g Comp a n y , LLC ( SN M H C ) and i t s aff

i l i at ed compani es , i ncl udi ng A SP and SN SC . T he SN I for ce- pl ace d pol i cycont ai ned an “ ot heri ns ur ance ” cl aus e, w hi ch pr ovi ded: “If there i s avai l able t o the A ssur ed an yotheri nsurance at the ti m e of loss

. . . cover i ng t he s ame pr oper t yagai ns tthe s ame per i l s i ns ur ed aga i ns tunder th is P o licy. . . this in su ra n c e sh a ll n o t b e c a lled u p o n in c o n trib u tio n u n til th e a m o u n t d u e f

ro m a ll su c h [ o th e r] in su ra n c e sh a ll h a v e b e e n e x h a u ste d ; it bei ng t he i nt entof thi s i ns ur ance t o i ndemni fythe A s s ur ed foronl ythe di ffe r ence betw een the amountdue fr om s uch otheri ns ur ance and the amount of ac tual l os s s us t ai ned bythe A s s ur ed notexce edi ng, how ever , the a p p lic a b le lim it s p e c if

ie d in th is P o lic y .” A pp. 559 ¶14. T he SN I pol i cyl i s t ed “Sec ur i t yN at i onal H ol di ng C om pany , L L C ” as t he “A s s ur ed. ” A pp. 553. O n N ovember10, 2004, a fi r e des t r oy ed the C apl ens ’ hom e. Soon aft erw ar ds , t he C apl ens s enta l ett ert o SN SC t o i nform i tof the fi r e but , as theyadmi t , us ed an i ncorr ect zi p code; SN SC neverr ece i ved the i ncorr ect l yaddr es s ed l et t er . T he C apl ens then5

defa ult ed o n the note for a second t i m e, prom pti ng A S P t o fil e a m oti on t o reass ess damages i n t he for ecl os ur e ac t i on. I n connec t i on w i t h t hatm ot i on, SN SC s entan i ns pect ort o t he C apl ens ’ pr oper t yon A pr i l 20, 2005; w hen the i ns pect ors aw the damage
c a u s e d b yt h e f

i r e , h e q u i c k l yi n f

o r me d S NSC . A f e w w e e k s la ter , S N S C w a s c o n tac ted b ya n a tto rn e yre p re se n tin g th e B lu e B e ll W o o d s C o m m u n ityA ss o c iatio n – th e h o m e o w n e rs’ a ss o c iatio n f o r th e d e v e lo p m e n t in
w h ich th e C a p len s’ h o m e w a s lo c a ted – w h o in f o rm e d S N S C th a t th e C a p len s’ p ro p e rty
w as c o v ere d b yan insu ran ce p o li cyissue d to the asso ciati o n b ythe G rea ter N ew Y o rk M u tu a l In su ra n c e C o m p a n ya n d th a t th e p ro c e e d s o f th a t p o licyw o u ld b e u se d to re p a ir t he p roperty . A m on g the m anyprovis i on s of t he G reat er N ew Y ork po l i cyw as a cl ause t i t l ed “U ni t - O w ner ’ s I ns ur ance , ” w hi ch s peci fi ed: “A uni t - ow nerm ayhave other i ns ur ance cover i ng t he s ame pr opert yas thi s i ns ur ance . T hi s i ns ur ance i s i nt ended t o be pr i m ary , and nott o contr i but e w i t h s uch otheri ns ur ance . ” A pp. 116 ¶6. O n Jun e 24 , 20 05 , t he C ou rtof C om m on P l eas grant ed A S P ’s m oti on t o reass ess damages and ent er ed an a m ended j udgm entagai ns tthe C apl ens i n t he amountof $129, 127. 44 – i ncl udi ng $1, 607. 13 forpr emi um s on t he SN I for ce- pl ace d i ns ur ance p o licyf ro m M a rc h 2 0 0 1 th ro u g h F e b ru a ry2 0 0 5 – p lu s p o st-ju d g m e n t in ter e st. A little
o v e r a y e a r la ter , the C a p len s s o ld th e ir p ro p e rtyf o r a n e t p ro f

it. T h e yu lti m a telyp a id $2, 407. 21 t o A SP for pr emi um s on the SN I pol i cythr ough J une 2006.6

O n N ovember15, 2005, J oi C apl en fi l ed thi s s ui ti n t he U ni t ed St at es D i s t r i ct C our tfort he East ern D i s t r i ctof Penns y l vani a aga i ns tSN M H C , A SP, SN SC , and SN I , as w ell as A lask a S ea b o ard Inv estm en ts, Inc . (A S I), S ec u ri tyN ati o n al M aster M an ag er, L L C , a n d R o b i n P . A r k l e y I I . S h e a s s e r t e d c l a i m s p r e d i c a t e d o n b r e a c h o f f i d u c i a r y d u ty, br eac h of contr act , fr aud, abus e of pr oces s , and bad f ai t h underPa. C ons . St at . A nn. § 8 3 7 1 , am o n g o ther c lai m s. F o ll o w ing d isco v ery , the d ef en d an ts m o v ed fo r sum m ary j udgm ent , w hi ch the D i s t r i ctC our tgr ant ed as t o al l count s . T hi s t i m el yappea l fol l ow ed. II. T he D i s t r i ctC our thad j ur i s di ct i on under28 U . S. C . § 1332 and w e have juri sd ict ion u n d er 2 8 U . S . C . § 1 2 9 1 . W e e x erc ise p lena ryrev iew o v er a d istri ct co u rt ’s d e c isio n to g ra n t su m m a ryju d g m e n t, ap p ly in g th e sa m e sta n d a rd th e d istric t co u rt sh o u ld
a p p ly. U ni on P ac. R
. R
. C o. v. G r eentr ee Tr ans p. Truc ki ng C o. , 293 F. 3d 120, 125 ( 3d C i r . 2002) . Sum m aryj udgm enti s appr opr i at e onl y“i f the pl eadi ngs , the di s coveryand d isc lo su re m a ter ials o n f ile, a n d a n ya f

f id a v its sh o w th a t th e re is n o g e n u in e iss u e a s to
a n yma t e r i a l f

a c ta n d t h a tt h e mo v a n ti s e n t i t l e d t o j u d g me n ta s a ma t t e ro f l a w. ” F e d . R. C i v. P. 56( c) . T he fa ct s m us tbe vi ew ed i n t he l i ghtm os tfavor abl e t o t he nonmovi ng p a rt ya n d a ll r e a s o n a b le in f e re n c e s f ro m th e e v id e n c e m u s t b e d ra w n in th a t p a rt y ’s f a v o r. C onopco, I

nc. v. U ni t ed Stat es , 572 F. 3d 162, 165 ( 3d C i r . 2009) . “W e mayaff i r m the D i s t r i ctC our t ’ s or dergr ant i ng s um m aryj udgm enton di ffe r entgr ounds , s o l ong as the
r ecor d s uppor t s t he j udgm ent . ” I d. ( ci t i ng T

u rn er v . C ra w

fordSq u a re Ap a rtm en ts I II,T he D i s t r i ctC our tdet erm i ned, and the part i es do notdi s put e, thatthe s ubs t ant i ve 2 la w o f P e n n s y lv a n ia g o v e rn s h e re . See , e. g. , B er r i erv. Si m pl i ci t y M f g. , I nc. , 563 F. 3d 38, 4 6 n . 1 1 (3d C ir . 2 0 0 9 ). 7 L. P. , 449 F. 3d 542, 548 ( 3d C i r . 2006) and G uthr i e v. Lady Jane Col l i er i es , I nc. , 722 F. 2d 1 1 4 1 , 1 1 4 5 n . 1 (3d C ir . 1 9 8 3 )). III . O n a p p e a l, C a p len a rg u e s th a t th e D istric t C o u rt e rre d in d e ter m in in g th a t S N I d id notow e heranydut yunderi t s for ce- pl ace d pol i cybeca us e, s he i ns i s t s , s he and he r h u sb a n d “ w e re in su re d s u n d e r th e p o licy .” T h is a rg u m e n t is w ith o u t m e rit. U n d e r P e n n sy lv a n ia la w , a c o u rt in terp re tin g a n in su ra n c e p o licy“ m u st a sc e rta in t he i nt entof the part i es as m ani fes t ed bythe l anguage of the w r i t t en agr eement . W hen t he pol i cyl anguage i s cl earand unambi guous , the courtm us tgi ve ef fec tt o t he l anguage o f th e c o n tr a c t.” R i cci o v. A m . R epubl i c I ns . C o. , 7 0 5 A . 2 d 4 2 2 , 4 2 6 (P a. 19 9 7 ). “[ A ]n 2 i ns ur ance pol i cy , l i ke eve r yot herw r i t t en contr act , m us tbe r ead i n i t s ent i r etyand the i nt entof the pol i cyi s gather ed fr om cons i der at i on of the ent i r e i ns t rum ent . ” I d. ; acco rd N at i onw i de I

ns . C o. v. Schnei der , 9 0 6 A . 2 d 5 8 6 , 5 9 1 (P a. S u p er. C t. 2 0 0 6 ). C apl en ac know l edges t hats he i s nota named i ns ur ed underthe SN I pol i cy , but
s uppor t s herar gum entbypoi nt i ng t o l anguage i n t he SN I pol i cyi ndi cat i ng thati ti ns ur es “the fi nanci al i nt er es tof a Borr ow eri n C over ed Pr oper t yi n t he eve ntthats uch C over ed P ropertysuffers D i rectP hy si cal L oss or D am age.” A pp . 55 6 ¶1 . B ut the S N I pol i cyal so unambi guous l ypr ovi des t hati tm aybe “c al l ed upon i n contr i but i on” onl yaft eral l ot her8

avai l abl e i ns ur ance on t he pr oper t yhas been “ exhaus t ed. ” A pp. 559 ¶14. I n br i ef, the S N I po li cyis plainlyan “e x ce ss” p o li cy– C ap len’s a rgu m en t t o the c o n tr ary not w i t hs t andi ng – and the undi s put ed evi dence i n t he r ecor d demonstr at es thatthe G r eat er N ew Y or k i ns ur ance pol i cycompl et el ycover ed the cos tof r es t or i ng the C apl ens ’ hom e, l eavi ng no exce s s amount fort he SN I pol i cyt o contr i but e. T hus , aft ercons i der i ng the SN I pol i cyi n i t s ent i r ety , w e agr ee w i t h t he D i s t r i ctC our tthatSN I di d notow e C apl en anydut yunderi t s pol i cy . M or eover , t o t he ext entC apl en i nt ends t o ar gue thatthe D i s t r i ctC our terr ed i n concl udi ng t hatSN I ow ed herno fi duci aryduty , s he poi nt s t o no e v id e n c e in th e re c o rd o r c a s e la w th a t w o u ld le a d u s to d is tu rb th a t d e te rm in a tio n . Ac c o r d i n g l y , Ca p l e n ’ s c l a i ms a g a i n s tS NI f a i l a s a ma t t e ro f

l a w. W e al s o r ej ectC apl en’ s cont ent i on thatthe D i s t r i ctC our ts houl d nothave gr ant ed
s um m aryj udgm enti n favorof the otherdefe ndant s on herabus e of pr oces s cl ai m . “The gi s tof an a ct i on forabus e of pr oces s i s the i m pr operus e of pr oces s aft eri thas been i s s ued, t hati s , a perver s i on of i t . ” McG ee v . Feege , 535 A . 2d 1020, 1023 ( Pa. 1987) (i nternal ci t at i on om i t t ed). T o est abli sh a cl ai m for abu se of p rocess , a plai nti ff m ust sh o w th a t th e d e f

e n d a n t “( 1 ) u se d a leg a l p ro c e ss a g a in st th e p lain tiff , (2 ) p rim a rilyto
acc om pl i s h a purpos e forw hi ch the pr oces s w as notdes i gned[, ] and ( 3) harm has been
caus ed t o t he pl ai nt i ff. ” C r uzv. P r i nceton I ns . C o. , 9 7 2 A .2 d 1 4 , 1 5 n .1 (P a . S u p e r. C t. 2 0 0 9 ) (in ter n a l q u o tatio n m a rk s o m itt e d ); acco rd R o se n v . A m . B a n k o f R o lla , 627 A . 2d 1 9 0 , 1 9 2 (P a. S u p er. C t. 1 9 9 3 ).W e have cons i der ed the s undr yot heras s ert i ons i n C apl en’ s appel l at e br i efs and, 3 t o t he ext entw e ca n deci phert hem, w e r ej ectthem as uns uppor t ed bythe r ecor d. 9 C a p len a rg u e s th a t A S P (a n d , b ye x ten sio n , the o th e r n o n -S N I d e f e n d a n ts) o n ly
so u g h t r eim b u rsem en t fo r pre m ium s o n the S N I fo rce -plac ed p o li cyin the fo rec losu re act i on, and r efus ed t o r el eas e the l i en on the C apl ens ’ pr oper t y , i n or der“t o ext or tgr eat er paym entt han w hati s ow ed byt he al r eadys tr apped s ub- pr i m e borr ow er . ” B utA SP w as author i zed, undert he cl eart erm s of the mort gage a nd pr om i s s orynot e, t o for ce pl ace i ns ur ance on t he C apl ens ’ pr opert yi n t he abs ence of pr oof of i ns ur ance , and C apl en has i nt r oduced no e vi dence t hats he eve rpr ovi ded s uch pr oof. N orhas s he i ntr oduced a ny e v id e n c e th a t A S P p u rs u e d a n ya s p e c t o f th e f o re c lo s u re p ro c e s s f

o r i lle g itim a te re a s o n s . Th e Di s t r i c tCo u r tc o r r e c t l yg r a n t e d s u mma r yj u d g me n to n th i s c l a i m. 3 I V. Fort he for egoi ng r eas ons , w e w i l l aff i r m the D i s t r i ctC our t ’ s or der s gr ant i ng sum m aryj ud gm ent i n fav or of t he d efen dan t s.