Court Opinion

ID: 3019830
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:21:43.736814+00
Date Added: 2024-06-11T08:53:07.229341
License: Public Domain

United States Court of Appeals
                             FOR THE EIGHTH CIRCUIT
                                     ___________

                                     No. 96-4039
                                     ___________

First Colony Life Insurance Company, *
                                     *
            Plaintiff,               *
                                     *
      v.                             *
                                     * Appeal from the United States
Daniel R. Berube,                    * District Court for the
                                     * District of South Dakota
            Appellant,               *
                                     *
      v.                             *
                                     *
Nancy R. Cox, also known as Nancy R. *
Walker,                              *
                                     *
            Appellee.                *
                                ___________

                          Submitted: December 1, 1997
                              Filed: December 10, 1997
                                   ___________

Before McMILLIAN, BEAM, and MURPHY, Circuit Judges.
                            ___________

McMILLIAN, Circuit Judge.

       Daniel R. Berube appeals from the final order of the United States District Court1
for the District of South Dakota, granting summary judgment and attorney&s fees to

      1
       The Honorable Andrew W. Bogue, United States District Judge for the District
of South Dakota.
Nancy R. Cox in this diversity interpleader action. For the reasons discussed below, we
affirm.

        In a 1988 settlement of his workers& compensation claim, Berube received a
lump-sum distribution, a portion of which went to purchase a “nonrefund single
premium life annuity,” which guaranteed Berube a payment of $857.42 per month for
life. In 1991, Berube entered into an agreement with Cox, by which Cox agreed to pay
Berube $54,640 in exchange for an assignment of his monthly annuity payments for a
period of 240 months. The agreement set the amount of the deemed principal at
$75,599.90. The agreement further provided for remedies in the event of a breach and
stated that should “either party institute[ ] legal action for the enforcement of any right,
obligation, provision or covenant of this agreement, the prevailing party shall be entitled
to a reasonable attorney&s fee in addition to costs of suit.”

       In 1995, Berube demanded of the insurance carrier reinstatement of his monthly
annuity benefits. The insurance carrier brought this interpleader action against Berube
and Cox in district court and deposited the annuity payments into the registry of the
court. The district court thereafter discharged the insurance carrier from further liability.

      Berube moved for summary judgment, arguing the agreement with Cox was void
because S.D. Codified Laws § 62-4-422 prohibited the assignment of his workers&
compensation benefits. In a cross-claim against Cox, Berube alternatively argued that
he was entitled to rescind the agreement, because he did not understand the meaning

       2
        Section 62-4-42 provides:

             Assignment of payments prohibited -- Certain compensation
       exempt from claims of creditors.
             No claim for compensation under this title is assignable, and all
       compensation and claims therefor are exempt from all claims of creditors
       except those for child and spousal support obligations.

                                            -2-
of “deemed principal.” Cox answered the complaint and cross-claim, affirmatively
pleading breach of contract and seeking, inter alia, attorney&s fees and costs. She also
moved for summary judgment and attached Berube&s deposition testimony, in which he
acknowledged that he could not read because of dyslexia, that he did not read the entire
agreement before signing it, and that, notwithstanding his inability to understand all of
the agreement&s provisions, he did not seek advice from an attorney or an explanation
from anyone else.

       Noting that the South Dakota Supreme Court had never addressed whether
§ 62-4-42 prohibited assigning annuity benefits purchased with the proceeds of a lump-
sum workers& compensation award, the district court concluded that it did not, and thus,
the assignment to Cox was valid. The district court also concluded Berube could not
show he was entitled to rescind the agreement with Cox, because Berube&s mistake was
caused by his neglect of a legal duty, that is, he failed to read the written agreement or
have someone explain it to him. The district court granted summary judgment to Cox
and, following a hearing, also awarded Cox attorney&s fees and costs in the amount of
$10,968.53.

        We review the grant of summary judgment de novo. See Walker v. State Farm
Mut. Auto. Ins. Co., 973 F.2d 634, 636 (8th Cir. 1992). We also review de novo a
district court's application of state law in diversity cases. See Salve Regina College v.
Russell, 499 U.S. 225, 239 (1991). In the absence of controlling state law, we must
predict how the state&s highest court would decide the issue. See Brandenburg v.
Allstate Ins. Co., 23 F.3d 1438, 1440 (8th Cir. 1994).

      We agree with the district court that the South Dakota Supreme Court would
conclude that the assignment here is not prohibited by § 62-4-42. The anti-assignment
provision of that statute is limited to “claims for compensation,” and thus is not
applicable, because Berube received his lump-sum distribution and he could use the
proceeds for whatever purpose he saw fit. See Highland Park State Bank v. Salazar,
555 S.W.2d 484, 487 (Tex. Civ. App. 1977, writ ref’d n.r.e.) (claim for compensation

                                           -3-
means right of action against employer; to prohibit assignment of proceeds would
disable employee from using money for intended purposes); Rhea v. Park, 211 Tenn.
589, 366 S.W.2d 765, 768 (1963) (claim for compensation covers every stage before
actual payment of award); cf. In re Sloma, 43 F.3d 637, 639-40 (11th Cir. 1995)
(assignment of monthly payments received under annuity purchased as award to injured
employee not prohibited under Longshore and Harbor Workers& Compensation Act, 33
U.S.C. § 916). Berube&s reliance on In re Delgado, 967 F.2d 1466, 1468 (10th Cir.
1992), is misplaced, because that case relies on a Kansas statute which also prohibits
assignment of “compensation agreed upon, awarded, adjudged, or paid,” Kan. Stat.
Ann. § 44-514 (1986).

       We also agree that Berube is not entitled to rescission for mistake, because his
mistake was caused by the neglect of a legal duty, which extended to making sure he
understood the contents of the contract before he signed it. See S.D. Codified Laws §
53-4-9; Sutherland v. Sutherland, 187 Kan. 599, 358 P.2d 776, 785 (1961) (duty to read
and obtain explanation of contract contents); Beatty v. Depue, 78 S.D. 395, 103
N.W.2d 187, 191 (1960) (mistake must not result from want of ordinary care and
diligence exercised by reasonable person).

       Finally, we agree with the district court that Cox was entitled to attorney&s fees
and costs under the terms of the agreement, because Berube&s cross-claim, which
required Cox to defend the legality and seek enforcement of the agreement, qualifies as
“instituting” legal action relating to the enforcement of the parties& rights under the
agreement, and she was the prevailing party. Berube has not challenged the amount of
the fees.

      Accordingly, we affirm the judgment of the district court.

                                          -4-
A true copy.

      Attest:

               CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                               -5-