Case: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Appellant, v. The RIGGS NATIONAL BANK OF WASHINGTON, D.C., Appellee
Abbreviation: National Union Fire Insurance v. Riggs National Bank
Decision Date: 1993-10-05
Docket Number: No. 92-7041
Citation: 303 U.S. App. D.C. 302
Volume: 303
Reporter: United States Court of Appeals for the District of Columbia Circuit
Court: United States Court of Appeals for the District of Columbia Circuit
Jurisdiction: United States
Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Appellant, v. The RIGGS NATIONAL BANK OF WASHINGTON, D.C., Appellee.
Judges: Before: MIKVA, Chief Judge, WALD and SILBERMAN, Circuit Judges
Pages: 302–306

Head Matter:
5 F.3d 554
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Appellant, v. The RIGGS NATIONAL BANK OF WASHINGTON, D.C., Appellee.
No. 92-7041.
United States Court of Appeals, District of Columbia Circuit.
Oct. 5, 1993.
Before: MIKVA, Chief Judge, WALD and SILBERMAN, Circuit Judges
A separate concurring statement filed by Circuit Judge SILBERMAN is attached.

Opinion:
CERTIFICATION OF QUESTIONS OF LAW
by the United States Court of Appeals for the District of Columbia Circuit to the District of Columbia Court of Appeals " pursuant to D.C.Code § 11-723
On September 8,1993, we heard oral argument in National Union Fire Ins. Co. of Pittsburgh, Pa. v. The Riggs Natl Bank of Washington, D.C., No. 92-7041. Questions of District of Columbia law are determinative of the pending appeal, and these questions are significant ones as to which there are no controlling precedent in the decisions of the District of Columbia Court of Appeals. Therefore, on our own motion, we certify the questions of law to the District of Columbia Court of Appeals.
The questions of law to be answered are:
1. Under District- of Columbia law, and given the facts described below, does the "Superior Equities Doctrine" apply to an action by an insurer as an assignee and conventional subrogee of its insured?
2. Under District of Columbia law, and given the facts described below, does the adoption of the Uniform Commercial Code, D.C.Code § 28:1-101 et seq., abrogate or modify the Superior Equities Doctrine?
These questions arose in an action, brought in federal court, because of the parties' diversity of citizenship, against a bank by an insurance company as an assignee and conventional subrogee of the insured depositor. See Transcripts of the Court's Ruling, No. 91-1992 (D.D.C. February 25, 1992).
The facts relevant to the questions certified are as follows. Between April 20, 1990, and May 14, 1990, unknown individuals cashed 14 fraudulent checks, totalling $640,-712.38, drawn on the account of NHP Property Management, Inc. ("NHP") at the defendant Riggs National Bank ("Riggs"). On June 22, 1990, NHP requested that Riggs recredit its account for the loss. After Riggs formally denied the request on November 15, 1990, NHP submitted its proof of loss to National Union Fire Insurance Company ("National Union") and was paid $597,980 ($640,712.38 less $32,732.38 recovered from a third-party bank and a $10,000 deductible).
Section 14 of NHP's policy with National Union provides in relevant part:
In the event of any payment under this Policy, the Company shall be subrogated to all the insured's rights of recovery therefor against any person or organization and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights.
Pursuant to this provision, NHP assigned National.Union all its rights against Riggs and agreed to be bound by the result of the suit.
National Union filed this suit against Riggs as an assignee and, by virtue of Section 14 of the policy, as a conventional subrogee of NHP. After a bench trial, the district court found that Riggs had complied with reasonable commercial standards in processing the checks and therefore was not negligent. The district court further held that, despite the clear presumption in the Uniform Commercial Code ("UCC") favoring the depositor against the bank, District of Columbia law requires a balancing of the equities when the depositor's insurer brings suit to recover from a bank, either by way of assignment or subrogation. Therefore, under the Superior Equities Doctrine, as between two innocent parties — National Union and Riggs — the equities balanced in favor of Riggs. National Union appealed, asserting that the Superior Equities Doctrine does not apply when the insurer sues as an. assignee and conventional subrogee, as opposed to an equitable subrogee.
We recognize that Washington Mechanics' Savings Bank v. District Title Ins. Co., 65 F.2d 827 (D.C.Cir.1933), requires a balancing of the equities when the insurance policy does not contain an explicit subrogation provision, and the insurer thus brings suit as an equitable subrogee. This rule, the Superior Equities Doctrine, is apparently still good law. See Schrier v. Home Indemnity Company, 273 A.2d 248, 251 (D.C.App.1971); Traveler's Indemnity Co. v. Riggs Nat'l Bank, 323 F.2d 804, 804 (D.C.Cir.1963).
It is unclear, however, whether the Superi- or Equities Doctrine applies when the insurer brings suit not as an equitable subrogee, but as an assignee or a conventional subrogee. Although both Washington Mechantes' and Schrier were equitable subrogation claims, some supporting authorities from other jurisdictions cited in those opinions involved conventional subrogation and assignments. See, e.g., Bank of Fort Mill v. Lawyers' Title Ins., 268 F.2d 313, 316-17 (4th Cir.1959) ("[Assignment creates no right greater than the equitable right of subrogation."); American Surety v. Bank of California, 133 F.2d 160 (9th Cir.1943) ("If insurers have no right of subrogation, their position is not improved by the assignments to them of insured's claim against bank."); see also Bachman v. Glazer, 316 Md. 405, 559 A.2d 365, 370 (1989) ("A conventional subrogee is not necessarily entitled to subrogation as a matter of legal right; the relative equities of the parties are still to be balanced."). On the other hand, District of Columbia law establishes the general rule that all claims are freely assignable, and permits the assignee to stand in the same position as the assignor. See D.C.Code § 28-2303; Flack v. Laster, 417 A.2d 393, 398-99 (D.C.App.1980). Following this principle, the insurer should enjoy the same rights as its insured depositor, who indisputably prevails over the bank in the absence of negligence. See D.C.Code § 28:3-404, 28:4-406.
The latest decision from the Court of Appeals on this subject, American Security Bank v. American Motorists Ins. Co., 538 A.2d 736 (D.C.App.1988), did not resolve the apparent conflict between the Superior Equities Doctrine and the free alienability of claims. In a discussion of the insurer's standing to bring suit, the court recognized the difference between conventional and equitable subrogation. See id. at 737 n. 1. The court cited 16 Couch on Insurance 2d, § 61.2, 61.3, which recognized authority stating that "a conventional subrogee does not have the burden of showing the superior equity in himself as plaintiff to authorize a recovery." However, because the insurer failed to prove the existence of a contract of subrogation, the court proceeded to analyze the equitable subrogation claim under the "balance of equities" framework of Washington Mechanics'. See American Security, 538 A.2d at 737 n. 1. The court thus left open the determinative question in this appeal, whether Washington Mechanics' applies to a case involving an assignment and conventional subrogation. Similarly, in Anaeostia Bank v. United States Fidelity & Guaranty Co., 119 F.2d 455 (D.C.Cir.1941), the insurer sued as both a subrogee and an assignee. But, because the court found that the bank was negligent, "[c]ases disallowing subrogation when 'equities are equal' [citing Washington Mechanics'] are not on point." Id. at 456.
Other jurisdictions have held that the enactment of the UCC abrogated or modified the Superior Equities Doctrine. See, e.g., General Accident Ins. Co. of America v. Fidelity & Deposit Co. of Maryland, 598 F.Supp. 1223, 1240 (E.D.Penn.1984) (After the adoption of the UCC, "the 'superior equity1 analysis of the past may be obsolete."); Hanover Ins. Companies v. Brotherhood State Bank, 482 F.Supp. 501, 509 (D.Kan.1979) ("The provisions of the UCC at § 3-406 and § 4-406 operate as at least a partial codification of the principles at work in the compensated surety defense."). The decisions of the District of Columbia Court of Appeals are unclear on this point. Although Schrier was decided after the enactment- of the UCC, that case involved a stolen automobile and therefore was not subject to the UCC. In American Security, the court cited to the balance of the equities analysis of 'Washington Mechanics', see 538 A.2d at 737 n. 1, but analyzed the case under the UCC's burden shifting provisions. See id. at 738, 741. Because the bank was negligent, the balance of the equities and the UCC analysis rendered the same result. See id. at 737 n. 1. The effect of the UCC on the Superior Equities Doctrine thus remains an open question under D.C. law.
Given the above conflict and uncertainty, we believe that we cannot confidently decide these significant questions as a matter of District of Columbia law without further guidance from the District of Columbia Court of Appeals. See Delahanty v. Hinckley, 845 F.2d 1069, 1072 (D.C.Cir.1988); Penn Mut. Life Ins. Co. v. Abramson, 530 A.2d 1202, 1206 (D.C.App.1987).
Appended to this certification are (1) the judgment of the district court and the transcript of the district court's ruling in this case, filed February 17, 1992, and now sub judice before the United States Court of Appeals for the District of Columbia Circuit; and (2) three sets of the joint appendix and briefs of the parties, filed in the United States Court of Appeals for the District, of Columbia Circuit, addressing the questions of law. [Editor's note: Appendix omitted from publication by the court.]