Opinion ID: 6859
Heading Depth: 3
Heading Rank: 1

Heading: MISS.CODE ANN. Sec. 15-1-54

Text: 36 Initially, we address the question of whether paragraph four of the COPAS accounting procedures violates MISS.CODE ANN. Sec. 15-1-5. As noted above, Sec. 15-1-5 provides: 37 The limitations prescribed in this chapter shall not be changed in any way whatsoever by contract between parties, and any change in such limitations made by any contracts [sic] stipulation whatsoever shall be absolutely null and void, the object of this section being to make the period of limitations for the various causes of action the same for all litigants. 38 As we have already stated, CMR contends that paragraph four violates this provision of Mississippi law. Paragraph four bears repeating: 4. Adjustments 39 Payment of any such bills shall not prejudice the right of any Non-Operator to protest or question the correctness thereof: provided, however, all bills and statements rendered to Non-Operators by Operator during any calendar year shall conclusively be presumed to be true and correct after twenty-four (24) months following the end of any such calendar year, unless within the said twenty-four (24) month period a Non-Operator takes written exception thereto and makes claim on Operator for adjustment. 40 In finding that paragraph four did not violate MISS.CODE ANN. Sec. 15-1-5, the district court concluded that contractual conditions precedent that must be met for rights to accrue do not violate Miss.Code Ann. Sec. 15-1-5. Exxon Corp. v. Crosby-Mississippi Resources Ltd., 775 F.Supp. 969, 975 (S.D.Miss.1991). The district court went on to conclude that the provision at question created conditions precedent to be met before challenging the validity of monthly billing statements. Id. at 976. In reaching this conclusion, the district court relied on cases in which Mississippi courts had upheld notice provisions in insurance contracts. Id. at 975-76. 41 For example, in Brander v. Nabors, the district court held that a provision in a claims made medical malpractice insurance policy requiring a claim to be made against the insured within thirty-six months of the policy's termination date did not violate Sec. 15-1-5. 443 F.Supp. 764, 770-72 (N.D.Miss.), aff'd, 579 F.2d 888 (5th Cir.1978). The pertinent provision of the insurance policy at issue in Brander provided: 5. In the event of 42
43 then this Insurance shall extend, subject otherwise to its terms, limitations, exclusions and conditions, to apply to claims made against the Assured during the thirty-six calendar months following immediately upon such expiration or termination but only for Malpractice committed or alleged to have been committed between the Retroactive Date [the beginning date of the policy] and such expiration or termination. 44 Id. at 766. 45 Under the terms of the policy, coverage extended to all acts of malpractice committed by the insured while the policy was in force. However, the policy limited its coverage to claims made against the insured within thirty-six months of the policy's termination. In Brander, suit was brought against the insured fifty-two months after the policy terminated for malpractice allegedly committed while the policy was in force. Id. at 767. The insurer claimed it was not liable under the policy because no claim was made against the insured within thirty-six months following the termination of the policy. Id. The insured argued that the policy's thirty-six month notice provision violated Sec. 15-1-5 because it impermissibly shortened the applicable statute of limitations. Id. The district court determined that the question to be answered in the case was whether the restrictions as to time articulated in the policy, during which claims must be made against the assured, are valid conditions precedent to the insurer's liability or impermissible attempts to shorten the state's applicable statute of limitations. Id. at 770-71. The district court found that the policy limitations relating to the time within which a claim must be made against the assured are valid conditions precedent to the insurer's liability and are not violative of Sec. 15-1-5. Id. at 772; see Cox v. Lamar Life Ins. Co., 208 Miss. 146, 43 So.2d 884, 886 (1950) (holding that a provision in a life insurance policy which allowed for the waiver of premiums and a monthly income if the insured supplied the insurer with proof of permanent disability by the anniversary date of the policy nearest the insured's sixtieth birthday was a condition precedent to the insurer's liability and therefore not a restriction on the applicable statute of limitations). 46 CMR argues that cases such as Brander are inapplicable to the present issue because the notice provisions in those cases were valid conditions precedent to liability, while the contractual provision in this case limits the time within which a party may act to enforce his rights. As support for its contention that the provision at issue in this case violates Mississippi law, CMR relies on Dodson v. Western Union Telegraph Co., 97 Miss. 104, 52 So. 693 (1910), and Illinois Central Railroad Co. v. Jordan, 108 Miss. 140, 66 So. 406 (1914). 47 In Dodson, the plaintiff sued Western Union for its failure to deliver a telegram. 52 So. at 693. Western Union contended that the following provision relieved it of any liability: 48 The company will not hold itself liable for errors or delays in transmission or delivery of unrepeated messages, beyond the amount of tolls paid thereon, nor in any case where the claim is not presented in writing within sixty days after the message is filed with the company for transmission. 49 Id. Dodson failed to present his claim within sixty days, and the lower court determined that this failure precluded him from recovering any damages from the company. Id. On appeal, the Mississippi Supreme Court noted that it had previously upheld a provision such as this as a valid condition precedent, with which the claimant must comply or lose his claim, and if he does comply he may sue within the time limited by the statute, and that it is not a limitation but a reasonable regulation. Id. The court, however, noted that a recently passed statute, Sec. 3127--predecessor to Sec. 15-1-5--was intended to void contractual provisions which have the effect of shortening the applicable statute of limitations. Id. The court concluded that [a]ll contracts which directly or indirectly have that effect are condemned. Id. at 694. On suggestion for rehearing, the court noted that previous cases upholding provisions such as this were, in essence, overruled by the new statute. Id. 50 Likewise, in Illinois Central Railroad Co. v. Jordan, the Mississippi Supreme Court determined that a provision in a bill of lading which stated that 51 [i]t is further agreed by the shipper that no claim for loss or damage to stock shall be valid against said railroad company unless it shall be made in writing, verified by affidavit, and delivered to the general freight agent of the company at the station from which the stock is shipped, or the agent of the company at the point of destination, within 10 days from the time said stock is removed from the cars 52 was invalid as an improper attempt to change the applicable statute of limitations. 66 So. at 406. 53 Based on Dodson and Jordan, CMR asserts that the contractual provision at issue is an improper attempt to shorten the applicable statute of limitations. 5 Certainly, the broad language in Dodson and its rejection of previous cases upholding notice provisions as proper conditions precedent would certainly appear to control the instant case. However, we believe that the full import of Dodson and Jordan has been limited by subsequent decisions by the Mississippi Supreme Court. 54 For example, in Aetna Life Insurance Co. v. Walley, an insured sued his insurer in an attempt to collect money he had spent in settlement of a malpractice judgment entered against him, as well as money expended in defending the original suit. 174 Miss. 365, 164 So. 16, 16 (1935). The insurer defended the suit on the grounds that the insured had failed to comply with clauses A, B, and C of the contract which provided: 55 A. Upon becoming aware of any malpractice, error or mistake, or any allegation of such malpractice, error or mistake, the Assured shall give immediate written notice thereof with the fullest information obtainable at the time to the Company, or its duly authorized agent. If claim is made on account of such malpractice, error or mistake, or allegations thereof, the Assured shall give like notice of such claim, together with full particulars. The Assured shall, at all times, render to the Company all co-operation and assistance in his power. 56 Report and defense of suits. 57 B. If suit is brought against the Assured to enforce a claim for damages covered by this policy, he shall immediately forward to the Company every summons or other process as soon as the same shall have been served on him, and the Company will, at its own cost, defend such suit in the name and on behalf of the Assured. 58 Co-operation of Assured. Expenses. 59 C. The Assured, whenever requested by the Company, shall aid in securing information and evidence, and the attendance of witnesses, and in prosecuting appeals, but the Assured shall not voluntarily assume any liability or interfere in any negotiations for settlement, or in any legal proceedings, or incur any expense or settle any claim, except at his own cost without the written consent of the Company previously given. 60 In construing the applicable provisions, the Walley court noted that 61 [t]he requirements of clauses A, B, and C of the policy conferred a valuable right upon the [insurer], the purpose of which was to enable it to investigate a claim against the appellee covered by the policy; to itself decide whether the claim should be settled without litigation, and, if not, to prepare its defense thereto, and should have been complied with, unless compliance therewith was waived or excused under some pertinent rule of law. 62 Walley, 164 So. at 19. In rejecting the insured's argument that clauses A, B, and C of the contract were void as impermissible restrictions on the applicable statute of limitations, the court stated that the 63 notice here required in no way affects the time within which suit must be brought on a policy, or within which notice must be given of a liability claimed to have arisen thereunder. The right of the insured to recover on this policy does not arise, if at all, until the termination of a suit against him for malpractice, and the time within which the insured must sue on the policy begins when, but not until, the termination of such a suit. 64 Id. at 19. The court concluded that these clauses of the policy relate only to things to be done before liability thereon becomes fixed, and when such is the case [ ] Section 2294, Code of 1930, is not violated. Id. at 19-20. 65 In Western Casualty and Surety Co. v. Honeywell, Inc., the Mississippi Supreme Court considered whether the following provision in a payment bond violated Mississippi public policy: 66 3. No suit or action shall be commenced hereunder by any claimant: 67 a) Unless claimant, other than one having a direct contract with the Principal, shall have given written notice to any two of the following: the Principal, the Owner, or the Surety above named, within 90 days after such claimant did or performed the last of the work or labor, or furnished the last of the materials for which said claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the materials were furnished, or from whom the work or labor was done or performed. 68 380 So.2d 1385, 1387 (Miss.1980). The payment bond at issue was executed pursuant to Mississippi statutory law which required the general contractor to execute a bond assuring that all persons supplying labor or material would be promptly paid. Id. at 1388. Mississippi statutory law did not address the question of whether the notice provision at issue was a valid provision of the required bond. 6 Further, the applicable statute of limitations provided that suit must be brought within one year of final settlement of the construction contract. Id. at 1386. 69 Honeywell, a supplier of a subcontractor, did not have a contract with the prime contractor, and, thus, was required, under the terms of the payment bond, to give written notice before filing an action to collect under the payment bond. Id. at 1387. Honeywell, however, failed to furnish the required notice. Id. Honeywell filed suit against the surety within the applicable statute of limitations for a suit on a bond. Id. The trial court concluded the ninety-day notice provision was repugnant to Mississippi public policy. Id. 70 On appeal, the Mississippi Supreme Court determined that the applicable notice provision did not violate public policy. The precise question on appeal was whether the ninety-day notice provision violated public policy as expressed in the applicable statute of limitation which allowed for suit on the bond to be commenced [ ] after the complete performance of said contract and final settlement thereof, and shall be commenced within one year after the performance and final settlement of said contract and not later. Id. at 1386. Even though Sec. 15-1-5 was not directly applicable to the case, the court relied on its earlier decision in Aetna Life Ins. Co. v. Walley, 164 So. 16 (1935) to conclude that the ninety-day notice provision did not violate public policy. Specifically, the court noted that, [t]he 90 day notice provision in the payment bond did not limit the time that Honeywell could bring suit under section 31-5-7 [the applicable statute of limitations] but related only to things to be done by Honeywell as a supplier of a sub-contractor before Western Casualty became liable to Honeywell. Western Casualty and Sur. Co., 380 So.2d at 1388. Thus, the court concluded that the ninety-day notice provision was a condition precedent to recovery by Honeywell. Id. at 1390. 71 However, it must be noted that not all notice provisions contained in insurance contracts have been upheld by the Mississippi Supreme Court. In Latham v. United States Fidelity & Guaranty Co., the Mississippi Supreme Court determined that the following provision of a fidelity bond was an impermissible restriction of the applicable statute of limitations: 72 No action shall lie against the Underwriter unless, as a condition precedent thereto, there shall have been full compliance with all the terms of this bond, not until ninety days after the required proofs of loss have been filed with the Underwriter, nor at all unless commenced within one year from the date when the Insured discovers the loss. If any limitation of time for notice of loss or any legal proceeding herein contained is shorter than that permitted to be fixed by agreement under any statute controlling the construction of this bond, the shortest permissible statutory limitation of time shall govern and shall supersede the time limitation herein stated. 73 267 So.2d 895, 896 (Miss.1972) (alteration in original). However, Latham is distinguishable from the instant case. In Latham, the contractual provision at question required the insured to bring suit within one year of discovery of the loss even if the insured had complied with all other requirements of the contract. It is hard to imagine a provision which would more clearly violate Sec. 15-1-5 than this one. 74 Sitting in diversity, our quest is to determine how the Mississippi Supreme Court would construe the provision at issue in this appeal. We believe that, presented with the question before us, the Mississippi Supreme Court would determine that paragraph four of the COPAS accounting procedures does not violate Sec. 15-1-5. First, we note that this provision is different from other provisions which the Mississippi Supreme Court has struck down because it does not completely foreclose CMR from bringing suit against Exxon. E.g., Latham, 267 So.2d at 896 (striking down a contractual provision which provided that an insurer could not bring suit unless the suit was commenced within one year from when the insurer discovered the loss). Rather, the provision creates an evidentiary presumption, albeit a conclusive one, in favor of Exxon's billing statements upon the non-operator's failure to take exception to those statements within the applicable time period. 7 75 If it is theoretically possible that paragraph four could be interpreted as foreclosing a claim before the applicable statute of limitations has run--a matter we need not decide--this is not such a case. In the instant case, CMR has asserted defenses to Exxon's collection efforts, but no affirmative claims for relief. Specifically, CMR has interposed as an affirmative defense the following: gross negligence, willful misconduct, and failure to meet the requirements of and satisfy the provisions of the agreement. CMR does not, because it cannot, argue that its right to pursue these affirmative defenses to avoid liability to Exxon is subject to any limitation periods--statutory or otherwise. See Distribution Servs. Ltd. v. Eddie Parker Interests, Inc., 897 F.2d 811, 813 (5th Cir.1990) (noting that a defense is never barred by limitations so long as the plaintiff's main action itself is timely). Thus, paragraph four cannot, in this case, act to terminate CMR's defense to Exxon's suit prematurely. Even though CMR has attempted to couch its defenses to Exxon's collection efforts as claims for relief, these are really defenses in that they seek to deduct from Exxon's recovery under the contract. Further, even if CMR has asserted claims which were improperly labeled as defenses, those claims were properly dismissed because CMR failed to present any evidence in support, not because paragraph four foreclosed them. See Part III.2 supra. Therefore, under the facts presented in this case, we cannot say that paragraph four violates Mississippi law as an impermissible limit on any applicable statute of limitations.