Opposition Brief — Continental Electric Co. v. American Employers' Insurance

I

No. 87-1644 ~/

In The

Supreme Court of the United States

October Term, 1987

oO

Continental Electric Company, an Alabama corporation;

and Randolph Hall, Gaddis Hall and Robert Allen,

individually and as co-partners in the partnership

doing business as R G & B Leasing,

Petitioners,

American Employers’ Insurance Company,

Respondent.

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

Rosert M. GrrardEAvu

Houtr, FernamBucg & STEWART

825 First Alabama Bank Building

Birmingham, Alabama 35203

Telephone: (205) 251-1193

Attorney for Respondent

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

or call collect (402) 342-2831

QUESTION PRESENTED

1. Whether the United States Supreme Court has

jurisdiction to entertain the Petition for Writ of Certiorari

as no Federal Questions were presented to or passed upon

by the Alabama Supreme Court.

|

ii

TABLE OF CONTENTS

Page

QUESTION PRESENTED Woes

OPINION BELOW .... = nssneipicseneindaiuslstuchseeted 1

JURISDICTION OS cwteiniidectln tet 4M

CONSTITUTIONAL, STATUTORY AND OTHER

PROVISIONS EXVOLVED

STATEMENT OF THE CASE

ARGU MENT eet ae ere NaI 3

The Petition for Writ of Certiorari must be de-

nied because no Federal Question was presented

to or passed upon by the Alabama Supreme

Os :) 5 SNRs season yan) Ls Etat 3

CONCLUSION ~etasstanersiiaahalasatlpac ape te 8

APPENDIX ieinabie Al

APPENDIX “A” sadlcaheecoateatcsaines Al

APPENDIX ‘*B”’ obepeaeaa ee

APPENDIX ‘‘C” Dubciiamecnceeaead Cae

ill

TABLE OF AUTHORITIES

CASES

Cardinale v. Louisiana, 394 U.S. 4837 (1969) |

Citizen’s National Bank v. Durr, 257 U.S. 99

(1921)

Continental Electric Company v. American Em-

ployers Ins. Co., — So.2d — (1987)

Illinois v. Gates, 462 U.S. 213 (1983)

Webb v. Webb, 451 U.S. 493 (1981)

Wilson v. Birmingham Post Co., 482 So.2d 1209

NGS nc 51h

OTHER AUTHORITIES

oe ae Stoo, (1984) ee eo SOO

een © oere ere 8.)

Rule 56, Alabama Rules of Civil Procedure .......................

OPINION BELOW

Petitioners’ statement of the Opinion Below is suffi-

cient.

JURISDICTION

The United States Supreme Court is without juris-

diction under 28 U.S.C. 1257(3). The Federal Questions

raised in the Petition for Writ of Certiorari were neither

set forth for consideration to the Alabama Supreme Court

nor ruled upon by that Court.

~~ —-—-0

CONSTITUTIONAL, STATUTORY AND

OTHER PROVISIONS INVOLVED

28 U.S.C. § 1257 (1964) provides in pertinent part:

Final judgments or decrees rendered by the highest

court of a state in which a decision could be had, may

be reviewed by the Supreme Court as follows:

(3) By Writ of Certiorari . . . where any title,

right, privilege or immunity is specially set up or

claimed under the Constitution, treaties or statutes

of, or commission held by authority exercised under,

the United States. 28 U.S.C. § 1257 (1964).

Supreme Court Rule 21.1(h) provides in pertinent

part:

If review of the judgment of a state court is sought,

then the statement of the case shall also specify the

1

bo

stage in the proceedings, both in the court of first

instance and in the appellate court, at which the

federal questions songht to be reviewed were raised;

the method or manner in raising them and the way

in which they were passed upon by the court; such

-pertinent quotation or specific portions of the record,

or a summary thereof, with specifie reference to the

places in the record where the matter appears . . .

as will show that the federal question was timely and

properly raised so as to give this court jurisdiction

}

'

to review the indement on writ of certiorari. Sup. Ct.

R. 21.1¢h) (1980).

Otherwise, Petitioners’ statement of Constitutional, Stat-

utory and Other Provisions Involved is sufficient.

STATEMENT OF THE CASE

Petitioners’ statement is sufficient except insofar as

Petitioners claim that the Federal Questions raised in the

Petition for Writ of Certiorari were presented to the Ala-

bama Supreme Court and ruled upon thereby, Petitioners’

claims concerning the denial of due process of law as re-

quired by the Constitution of the United States were never

raised. Furthermore, all references to trial by jury in the

Alabama State court proceedings and Alabama Supreme

Court opinion were made with regard to Alabama’s sum-

mary judgment rule, Rule 56, Alabama Rules of Civil

Procedure. At no time was this respondent or the Su-

preme Court of Alabama aware that Federal (Questions

were being raised by the Petitioners.

3

ARGUMENT

The Petition for Writ of Certiorari must be denied

because no Federal Question was presented to or

passed upon by the Alabama Supreme Court.

Continental Electric Company’s Petition for Writ of

Certiorari should be denied because the Court is without

jurisdiction to entertain the questions set forth in the

Petition. Petitioners have failed to raise a Federal Ques-

tion in the Alabama State court proceedings. Furthermore,

the Alabama Supreme Court has failed to pass upon a

Federal Question in its decision in this case.

The Supreme Court’s jurisdiction over finai judg-

ments rendered by state courts is set forth in 28 U.S.C.

§ 1257 as follows:

Final judgments or decrees rendered by the highest

court of a state in which a decision could be had, may

be reviewed by the Supreme Court as follows:

(3) By Writ of Certiorari . . . where any title,

right, privilege or immunity is specially set up or

claimed under the Constitution, treaties or statutes of,

or commission held by authority exercised under,

the United States. 28 U.S.C. § 1257 (1964).

This Court has considered on many occasions wheth-

er a Federal Question was ‘‘specially set up or claimed’”’

and has stated that ‘‘[i]t is a long settled rule that the

jurisdiction of this Court to re-examine the final judgment

of a state court can arise only if the record as a whole

shows either expressly or by clear implication that the

federal claim was adequately presented in the state sys-

tem.’’ Webb v. Webb, 451 U.S. 493 (1981). The Supreme

4

Court further requires in its rule of procedure 21.1(h)

as follows

If review of the judgment of a state court is sought,

then the statement of the case shall also specify the

stage in the proceedings, both in the court of first

instance and in the appellate court, at which the

federal questions sought to be reviewed were raised;

the method or manner in raising them and the way

in which they were passed upon by the court; such

pertinent quotation or specific portions of the record,

or a summary_thereof, with specifie reference to the

places in the record where the matter appears

as will show that the federal question was timely and

properly raised so as to give this court jurisdiction

to review the judgment on writ of certiorari. Sup. Ct.

R. 21.1(h) (1980).

The record of proceedings in the Alabama state court does

*?

not ‘‘expressly or by clear implication’ show that a fed-

eral claim was presented to the state court. Nor, have

petitioners amply set forth in their Petition for Writ of

Certiorari the presentation of such a federal question

and ruling thereon by the Alabama Supreme Court.

Petitioners’ asserted ground for Writ of Certiorari

is the denial of due process of law as required by the

Fourteenth Amendment of the United States Constitu-

tion. Petitioners further claim that such denial of due

process arises from the Alabama Supreme Court’s failure

to follow established standards of appellate review, and

also the Alabama Supreme Court's denial of a trial by

jury as required by the Alabama and United States Con-

stitutions. In Petitioners’ statement of the case in their

Petition for Writ of Certiorari, the only reference to due

process Claims being raised in the state court proceedings

are as follows:

“With respect to the issue raised herein pertaining to

whether Continental was denied due process of law

by the Alabama Supreme Court’s failure to follow

established standards of appellate review, Continental

expressly presented that issue to the Alabama Su-

preme Court in its application for re-hearing with

supporting brief. (See pages in Appendix I’, infra.)

That issue was ruled unon by the Alabama Supreme

Court’s general order overruling Continental’s appli-

sation for re-hearing.”

Petition for Writ of Certiorari, pg. 6.

A review of Petitioners’ Appendix F reveals no express

presentation of the issue of denial of due process under

the Fourteenth Amendment. In fact, Petitioners argue

only the standard of review required by Alabama Rule of

Civil Proeedure 56(¢), which provides that a summary

“judgment sought shall be rendered forthwith if the plead-

ings, depositions, answers to interrogatories, and admis-

sions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter

of law’’. Ala.R.Civ.P. 56(¢e) (1987). The entire record of

the state court proceeding, including Petitioners’ briefs

and the Alabama Supreme Court decision, is completely

devoid of any mention or ruling upon the issue of denial

of due process of law under the [fourteenth Amendment.

Even if Petitioners had raised expressly their due proc-

ess claims in its application for re-hearing to the Alabama

Supreme Court, constitutional issues raised for the first

time in a petition for re-hearing; when such petition is

denied without reasons given, come too late for review

by the ULS. Supreme Court. ('itize ns National Banik: OP

or)

Durr, 257 U.S. 99 (1921). Petitioners’ application for re-

hearing was in fact denied without reasons therefor by the

Alabama Supreme Court. See, Petition for Writ of Cer-

tiorari, Appendix B, p. A-12.

})]

Petitioners have also claimed that the denial of trial

by jury has given rise to denial of due process of law. The

state court record is clear that all references to trial by

jury were given with regard to Alabama’s summary judg-

ment rule and “seintilla rule.” The “seintilla rule” pro-

vides the test as to whether there is a “genuine issue as

to any material fact” which will prevent entry of summary

judement. Wilson vo. Birmingham Post Co., 482 Sod 1209

(Ala. 1986). The Alabama Supreme Court understood the

arguments to be framed around only Alabama rules as

evidenced by the following excerpt from the Alabama Su-

preme Court decision wherein the court reversed summary

judgement on whether an agency relationship existed be-

tween American Iamployers and Mr. John Creel:

We do hold that the evidence, viewed in the light most

favorable to Continental, and under owr seintilla rule,

ereates a genuine issue of material fact, on the follow-

ing three issues and these matters are to be resolved

by a trier of fact. Continental Electric Company v.

American Employers Ins. Co., — So.2d — (1987) (Pe-

tition for Writ of Certiorari to the Alabama Supreme

Court, Appendix A, p. A-7.) (emphasis added.)

Furthermore, in Petitioners’ brief on appeal to the Su-

preme Court of Alabama, their statement of issues present-

ed clearly shows that only Alabama law was set forth for

review. See, Appendix A. Petitioners only set forth Ala-

bama cases in support of their issues presented and raised

no Federal Questions in connection therewith.

~s

Petitioners also claim to have raised the issues of the

denial of a jury trial as giving rise to denial of due pro-

eess as required by the Constitution in their application

for re-hearing. A review of Petitioners’ issues presented

and actual argument in their application for re-hearing re-

veal that no Federal Questions were raised or argued. See,

Appendix “B” and “C”,

Furthermore, even if Petitioners had raised the Fed-

eral Questions in their application for re-hearing, as noted

earlier, this comes too late when the state court passes on

the applieation for re-hearing only by denial thereof with-

out an opinion. Citizen’s National Bank #. Durr, 257 US.

99 (1921).

In Lllinois v. Gates, 462 U.S. 218 (1983), the court

identified reasons for the “not pressed or passed upon”

rule. The court stated that: “[q]uestions not raised below

are those on which the record is very likely to be inade-

quate since it certainly was not compiled with those ques-

tions in mind.” Jd., 462 U.S. at 221, citing Cardinale v.

Lowisiana, 394 U.S. 487 (1969). In this ease, the record

is clearly inadequate as to any [’ederal Question because

such was not in the mind of the parties when the record

was compiled. Furthermore, ‘‘failure of the highest court

of a state to pass on a Federal Question is assumed to be

due to want of proper presentation in the state court un-

less the aggrieved party can show affirmatively to the

contrary.” Webb v. Webb, 451 U.S. 493 (1981). The court

also set forth comity reasons which arise out of the “due

regard for the appropriate relationship of the Supreme

Court to the state courts’, thus allowing a state court

“to rest its decision on an adequate and independent state

ground”. /llinois v. Gates, 462 U.S. at 222.

CONCLUSION

The only possible |*ederal Questions in the Alabama

state court proceedings must be drawn by extreme infer-

ence. This Court has stated that “[a]t the minimum, how-

ever, there should be no doubt from the record that a

claim under [a] federal statute or the Federal Constitu-

tion was presented in the state courts and that those

courts were apprised of the nature or substance of the

federal claim at the time and in the manner required by

the state law.” Webb v. Webb, 451 U.S. at 501. The Su-

preme Court should deny Continental Electric Company’s

Petition for Writ of Certiorari because Federal Questions

were not raised, the Alabama Supreme Court was not

apprised of the Federal Questions, and the Alabama Su-

preme Court did not pass upon such alleged Federal

Questions.

Respectfully submitted,

Rosperrt M. GrarpEAu

Hut, l’'eERNaMBUCQ & STEWART

825 First Alabama Bank Building

Birmingham, Alabama 35203

Telephone: (205) 251-1193

Attorney for Re sponde nt

APPENDIX

Al

APPENDIX ‘‘A’”’

STATEMENTS OF ISSUES PRESENTED

1. Did the trial court err when it rendered summary

Judgment on Continental’s claim against American for

breach of contract when the appeal record showed that a

scintilla of evidence existed to prove such claim?

Wilson v. Liberty National Life Ins. Co.,

331 So.2d 617.

Hartford Accident and Indemnity Co.,

308 So.2d 695.

2. Did the trial court err when it rendered summary

judgment on Continental’s claim against American for

fraud when the appeal record showed that a scintilla of

evidence existed to prove such claim?

Conitnental Assurance Co. v. Kountz,

461 So.2d 502.

Burt v. Commercial Union Ins. Co..,

489 So.2d 547.

3. Did the trial court err when it rendered summary

judgment on Continental’s claim against American for

declaratory judgment relief when the appeal record showed

that a scintilla of evidence existed to prove such claim?

Antram v. Stuyvesant Life Ins. Co.,

287 So.2d 837.

4. Did the trial court err when it rendered summary

judgment on Continental’s claim against American for

A2

bad faith when the appeal record showed that a scintilla

of evidence existed to prove such claim?

Gulf Atlantic Life Ins. Co. v. Barnes,

405 So.2d 916.

Aetna Life Insurance Co. v. Lavoie,

470 So.2d 1060.

5. Did the trial court err when it rendered summary

judgment on Continental’s claim against American for

negligence when the appeal record showed that a scintilla

of evidence existed to prove such claim?

Alabama Farm Bureau Mutual Casualty Ins. Co. +.

Haynes, 497 So.2d 82.

6. Did the trial court err when it rendered summary

judgment on Continental’s claim against American for

breach of contract to insure when the appeal record showed

that a scintilla of evidence existed to prove such claim?

Alabama Farm Bureau Mutual Casualty Ins. Co. +.

Haynes, 497 So.2d 82.

A3

APPENDIX ‘‘B”’

STATEMENT OF ISSUES PRESENTED

3. Was the term ‘‘equipment”’ in the inswrance con-

tract ambiguous such that Continental is entitled to a

jury trial on the issue of the meaning of that term?

Hill Air of Gadsden, Inc. v. City of Gadsden,

467 So.2d 230.

National Casualty Company v. Thompson,

96 So.2d 708.

4. Was Continental entitled to a jury trial on its

cause of action for bad faith against American, if the

term ‘‘equipment’’ is determined to be ambiguous?

Sparks v. Republic National Life Ins. Co.,

647 P.2d 1127.

Continental Ins. Co. v. Kounte.

461 So.2d S802.

A4

APPENDIX ‘‘C”’

IV. ARGUMENT

ARGUMENT ‘‘A”’

3.) The Term *‘ Equipment’’ In The Insurance Agreement

Was Ambiguous.

There are numerous cases in which this Court has de-

termined that contractual terms, far more ambiguous than

the term “equipment”, were ambiguous as a matter of law,

thereby preventing the entry of a summary judgment.

See: Hill Air of Gadsden, Inc. v. City of Gadsden, 467

So.2d 230, (meaning of lease provision concerning ‘‘iistru-

ment equipped”’ and ‘‘licensed by the FAA’’) ; Pierce-Dick-

erson Bonding Company v. Southern Guarantee Ins. Co.,

Oct. Term 1986-87, Case Number 85-723, 21 ABR 2065,

2/20/87 (meaning of **... use of the insured premise and

all operations necessary or incident thereto’’); Flemming

v. Alabama Farm Bureau Mutual Casualty Ins. Co., 310

So.2d 200; (meaning of “any member of the family of the

insured residing-m the same household as the insured’’) ;

National Casualty Co. v. Thompson, 96 So.2d 708 (mean-

ing of ‘‘automobile’’); Lee v. Clark and Associates Real

Estate, Inc.. October term, 1986-87, Case Number 895-389,

21 ABR 2418 3/27/87 (construction of a release provi-

sion); See also the Arizona Supreme Court's decision in

Sparks v. Republic National Life Ins. Co., 647 P.2d 1127

(1982).

Also, if the term ‘‘equipment’’ was not ambiguous,

why was it necessary for the trial court to review the af-

fidavits, as stated by this Court in its decision at the top

of page 5 of its decision. If the trial court must refer to

matters extrinsic to the insurance agreement to determine

the meaning of a contractual term, then the term is clearly

A5

ambiguous and the case is due to be decided by a jury and

not as a matter of law by summary judgment.

The insurance agreement also involves a term which,

on its face, is not only ambiguous, but also, in application,

that term became ambiguous by reason of a latent am-

biguity. This Court, in Mass Appraisal Services, Inc. v.

Carmichael, 404 So.2d 666,673, by quoting Gibson v. An-

Jerson, 265 Ala. 5538, 92 So.2d 692, stated:

... It is said that latent ambiguity arises when the

writing on its face appears clear and unambiguous,

but there is some collateral matter which makes the

meaning uncertain,’ 32 C.J.S., Evidence, [section]

961b, p.915; ‘that is, an uncertainty that does not ap-

pear on the face of the instrument, but which is shown

to exist for the first time by matter outside the writ-

ing’, 20 Am.Jur., Evidence, [section] 1157, p. 1010.

And it is well established that partial or other ex-

trinsic evidence is admissible to explain or clarify a

latent ambiguity.’’

This Court in the Carmichael case, held that the terms

of that contract involved a latent ambiguity and, for that

reason, held that the trial court properly determined that

the contract was ambiguous as a matter of law. Reasoning

by analogy compels the same conclusion of ambiguity with

respect to the term ‘‘equipment?’’ in this ease.

This Court in Grimes v. Massey Ferguson, Inc., 355

So.2d 338, specifically found that the term ‘‘equipment”’

was ambiguous. Unlike this case, this Court, in the

Grimes case, had far more available material to refer to in

the statute as a whole, in order to determine the meaning

of the term ‘‘equipment’’. It necessarily follows that the

\h

LR

i(UMENT

C

Aj

situation similar to that in this case, said at 647 P.2d 1127,

1137:

‘*We disagree with the defendants’ contention that an

insurer's belief that a portion 4f its insurance con-

tract precludes coverage raises an absolute defense to

a claim of bad faith. If the insurer's interpretation of

its own contract as excluding coverage could render

an insurer's claim ‘fairly debatable’ then insurers

would be encouraged to write ambiguous insurance

contracts, secure in the knowledge that an obscure por-

tion of the policy would provide an absolute defense

to a claim for bad faith. Although the insurer's belief

that the validity of insured’s claim was fairly debat-

able is a defense to a charge of bad faith, such a belief

is a question of fact to be determined by the jury.”’

The Sparks decision is abiding authority supporting

Continental's contention that American was not entitled

to a summary judgment on Continental's bad faith claim,

even if the term *‘equipment’’ is found to be ambiguous.

Further, this Court in Continental Ins. Co. v. Aountz,

461 So.2d 802; Nationwide Mutual Ins. Co. v. Clay, 469

So.2d 553; and Aetna Life Ins. Co. v. Lavoie, 470 So.2d

1060, after remand from the United States Supreme Court,

at Case No. 82-426 and 82-1152, Supreme Court of Ala-

bama, October term 1986-1987 (3/27/1987) made it clear

that the directed verdict tesi was not applicable where the

facts show that an insurance company blatantly and inten-

tionally failed to determine the existence of valid reason

for it’s denial of an insurance claim. The United States

Supreme Court on the appeal of the Lavete case, supra

at U.S. — 106 S.Ct. 1580, 89 L.Ed.2d 823, 829, inter-

preted the previous opinion of this Court with respect to

_

+