UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

TRAVELERS INDEMNITY COMPANY OF 

ILLINOIS,

Defendant-Appellant,

v.

LIBERTY MUTUAL INSURANCE  No. 02-1846 COMPANY,

Defendant-Appellee,

and

RYLAND MORTGAGE COMPANY,

Plaintiff. 

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

William M. Nickerson, Senior District Judge.

(CA-00-1118-WMN)

Argued: May 8, 2003

Decided: July 18, 2003

Before WILKINSON, NIEMEYER, and KING, Circuit Judges.

Affirmed in part, vacated in part, and remanded by unpublished per

curiam opinion. 

COUNSEL

ARGUED: Dale E. Hausman, WILEY, REIN & FIELDING, L.L.P.,

Washington, D.C., for Appellant. Warren D. Stephens, DECARO,
DORAN, SICILIANO, GALLAGHER & DEBLASIS, L.L.P., Lanham, Maryland, for Appellee. ON BRIEF: Jennifer S. Huber,

WILEY, REIN & FIELDING, L.L.P., Washington, D.C., for Appellant. 

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c). 

OPINION

PER CURIAM: 

This is a dispute between two insurance companies over payment

for the costs of defense in a suit involving a trip-and-fall accident in

which a visitor to a residential duplex building was injured. 

On May 28, 1994, Steve Fallen tripped and fell down the back

stairway of a duplex in Los Angeles owned by Bruce Stein, apparently sustaining serious injuries. Fallen contends that the stairway was

damaged as a result of an earthquake, and none of the several people

having an obligation to maintain the building effected repairs. 

Shortly before the time of the accident, Columbia Savings and

Loan, which financed Stein’s purchase of the duplex, failed, and the

deed of trust that Columbia held on the duplex passed to Resolution

Trust Corporation ("RTC"). RTC, in turn, assigned Columbia Savings

and Loan’s rights and duties under the deed of trust to State Street

Bank, as trustee under a Pooling and Service Agreement, and to

Ryland Mortgage, as the servicer of the loan pursuant to the same

Agreement. Before Fallen’s accident, Stein defaulted on his loan, and

State Street foreclosed on the property. 

To recover for his injuries, Fallen sued Stein as the party in possession of the building, State Street Bank as the party with ownership

and control over the building, and Ryland Mortgage as State Street’s

agent, alleging that each owed Fallen a duty of care to maintain the

2 TRAVELERS INDEMNITY v. LIBERTY MUTUAL INSURANCE
duplex in good order and to repair defects, particularly the damage

caused by the earthquake. 

When State Street Bank was served with Fallen’s suit papers, State

Street Bank tendered its defense to Ryland Mortgage pursuant to its

servicing agreement under which Ryland "agree[d] to indemnify

[State Street] from, and hold it harmless against, any and all losses,

liabilities, damages, claims or expenses (including reasonable attorneys’ fees) arising in respect of the Servicer’s acts or omissions in

connection with this Agreement or the Certificates." Ryland then tendered defense of the suit over to its insurer, Travelers Indemnity, and

to State Street’s insurer, Liberty Mutual. Both denied coverage, and

Ryland assumed the costs of defense for the Fallen action, honoring

its indemnity agreement with State Street Bank. 

Ryland commenced this action against both Travelers Indemnity

and Liberty Mutual, contending that Travelers was its principal

insurer and owed it a defense of the Fallen action and that Liberty

Mutual also owed Ryland a defense as an "other insured" based on

Ryland’s purported status as State Street’s "real estate manager" who

was expressly protected under the Liberty Mutual policy insuring

State Street. Travelers then reversed its decision and bore the costs of

Ryland’s defense in the Fallen litigation. It also filed a cross-claim

against Liberty Mutual to require it to pay a portion of the defense

costs, stating two theories for recovery. First, Travelers asserted that

it was entitled to contribution because its insured, Ryland, had borne

the cost of defending not only itself but also State Street, Liberty

Mutual’s insured. Second, it sued as a subrogee to Ryland asserting

that Ryland was an "other insured" under the Liberty Mutual policy

because Ryland was State Street’s "real estate manager." 

Although the procedural history of this case is complicated, we

need not trace its full history in detail. The district court granted summary judgment to Ryland against Travelers, requiring Travelers to

pay the full defense costs incurred by Ryland, and the only rulings

challenged on appeal involve Travelers’ cross-claim against Liberty

Mutual. On Travelers’ cross-claim, the district court entered judgment

in favor of Liberty Mutual holding (1) that Travelers was not entitled

to contribution from Liberty Mutual based on Liberty Mutual’s

alleged duty to defend State Street or on a theory of equitable subroTRAVELERS INDEMNITY v. LIBERTY MUTUAL INSURANCE 3
gation; and (2) that Travelers had no subrogation claim via Ryland for

coverage under Liberty Mutual’s policy. It is from these two rulings

that Travelers filed this appeal. For the reasons that follow, we affirm

the district court’s conclusion that Travelers’ claim for contribution

must fail as a matter of law, but we vacate its ruling that Travelers

did not, as a matter of law, have a subrogation claim based on

Ryland’s right to coverage under the Liberty Mutual policy. On this

latter subrogation claim, we conclude that material questions of fact

remain to be resolved. 

On Travelers’ first claim, that it was entitled to contribution, Travelers contends that because it footed the bill for the defense of both

Ryland and State Street and Liberty Mutual had a duty to defend State

Street, it is entitled to contribution of one-half of the defense from

Liberty Mutual based on the "other insurance" clauses in the insurance contracts and equitable subrogation. The district court rejected

this claim, as do we. First, Travelers has no standing to assert directly

State Street’s rights in the policy issued by Liberty Mutual. Whether

Liberty Mutual has a duty to defend State Street under the policy

issued to State Street by Liberty Mutual is not a question that may be

raised by Travelers, a stranger to that policy insofar as it provides

coverage to State Street. Moreover, Travelers is not entitled to contribution under a theory of equitable subrogation, which only applies

when one party pays a debt to protect its own interests even though

another party is "primarily liable" for the debt. See Fireman’s Fund

Ins. Co. v. Continental Ins. Co., 519 A.2d 202, 204 (Md. 1987). Travelers has not shown a debt for which any party other than its own

insured is "primarily liable," for the indemnification clause required

Ryland to indemnify State Street for liability arising out of Ryland’s

"act or omissions." Even if one interpreted the underlying complaint

to create the potential for direct liability for State Street, it would not

follow that the defense costs allocable to State Street alone would be

costs for which State Street is primarily liable such that it would be

inequitable to require Ryland, as indemnitor, to bear them. 

Travelers’ second claim is based on the notion that it was subrogated to Ryland’s position as an "other insured" under the Liberty

Mutual policy because the Liberty Mutual policy insured not only

State Street but also State Street’s "real estate manager." On this

claim, the district court concluded that Travelers/Ryland failed to

4 TRAVELERS INDEMNITY v. LIBERTY MUTUAL INSURANCE
respond to Liberty Mutual’s argument that Ryland was not a real

estate manager for State Street but rather the agent of RTC alone. The

court stated, "Having found that this argument went entirely unaddressed and unrebutted by Ryland, the Court finds that Liberty

Mutual should prevail on the issue." 

We have previously made clear, however, that Rule 56(e) does not

implement a "default judgment" rule that permits a court to grant

summary judgment based solely on the failure of a party to oppose

facts asserted by another party. "Although the failure of a party to

respond to a summary judgment motion may leave uncontroverted

those facts established by the motion, the moving party must still

show that the uncontroverted facts entitle the party to ‘a judgment as

a matter of law.’" Custer v. Pan American Life Ins. Co., 12 F.3d 410,

416 (4th Cir. 1993). 

Moreover, in the present case, Travelers’ purported failure to

respond to the assertion that Ryland was acting as a real estate manager for RTC alone, if it acted as a real estate manager at all, did not

leave the assertion uncontroverted, as the district court ruled. Travelers did submit evidence indicating facts which controverted Liberty

Mutual’s assertion that any real estate management services were performed only for RTC. Travelers’ best evidence of a genuine dispute

of material fact is the Pooling Agreement, a 109-page document that

defines the relationships among Ryland, State Street, and RTC. When

the district court first addressed itself to the "real estate manager"

issue, it noted Liberty Mutual’s reliance on language in the Agreement providing that "[t]he relationship of the Servicer [i.e., Ryland]

. . . to the Trustee [i.e., State Street] under this Agreement is intended

by the parties to be that of an independent contractor and not that of

a joint venturer, partner or agent." The court reasoned that "Liberty

Mutual has not established that despite the Agreement, Ryland was

not performing duties normally performed by that of a ‘real estate

manager.’ That issue presents a material question of fact, which is

disputed by the parties." (Emphasis added). This determination was

entirely correct. The court later supplanted this determination with its

subsequent ruling that Travelers failed to controvert Liberty Mutual’s

argument that Ryland acted as a real estate manager, if at all, for RTC

only. Liberty Mutual argued that the Pooling Agreement created a

contract between Ryland and RTC and a contract between State Street

TRAVELERS INDEMNITY v. LIBERTY MUTUAL INSURANCE 5
and RTC, but not a contract between Ryland and State Street. Yet the

very language from the Agreement that the district court quoted in the

course of making its initial determination demonstrates the infirmity

of Liberty Mutual’s argument. Because the Agreement defines the

relationship between Ryland and State Street as an independent contractor relationship, there can be no doubt that there is some formal

contractual relationship directly between Ryland and State Street. The

question then becomes whether this contractual relationship was one

in which Ryland performed as a "real estate manager" for State Street.

Because the facts before the district court established that there was

a direct contractual relationship between Ryland and State Street

under the Pooling Agreement, it was erroneous for the district court

to conclude as a matter of law that any "real estate manager" services

performed by Ryland would have been performed only for RTC. As

the district court properly determined when it first examined this

issue, factual development is necessary to resolve this question. 

Further factual development may also be necessary to determine

the extent to which the Pooling Agreement applies at all. If State

Street became the owner of the property through foreclosure before

Fallen fell on the property, a question arises as to Ryland’s continuing

liability as a servicer on that property under the Agreement. The typical understanding of a mortgage servicer would lead one to conclude

that a mortgage servicer might drop out of the picture completely

upon foreclosure. Once foreclosure takes place, there is no longer any

mortgage to service. Even if the facts in this case tracked this typical

understanding, however, Ryland may remain liable for preforeclosure negligence as well as for any post-foreclosure activities

that the Agreement obligated it to undertake. For example, the record

contains a letter sent by counsel for Ryland to Liberty Mutual that

argues for coverage under the "real estate manager" provision. This

letter states that "[t]he mortgage servicing agreement and the Fannie

Mae guidelines that inform it obviously require Ryland to take possession of, secure, inspect and maintain foreclosed property before the

property can be re-sold by a broker." We have no idea what provision

of the Agreement or the Fannie Mae guidelines underlay this assertion

by counsel for Ryland, let alone what makes the conclusion "obvious," but this letter, the Agreement, and the course of conduct attributed to Ryland in the Fallen complaint certainly indicate a genuine

6 TRAVELERS INDEMNITY v. LIBERTY MUTUAL INSURANCE
dispute of material fact regarding the nature of the contractual relationship between Ryland and State Street. 

Accordingly, we affirm the district court’s entry of summary judgment in favor of Liberty Mutual on Travelers’ direct claim for contribution and we vacate the district court’s entry of summary judgment

in favor of Liberty Mutual on Travelers’ subrogation claim that

Ryland was a "real estate manager" insured by Liberty Mutual’s policy. We remand for further proceedings. 

AFFIRMED IN PART, VACATED IN PART, AND REMANDED

TRAVELERS INDEMNITY v. LIBERTY MUTUAL INSURANCE 7