Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

LINES v. BANK OF AMERICA NAT. TRUST

July 10, 1990

DAVID E.W. LINES, AND GERRY A. WEISS, AS JOINT LIQUIDATORS OF THE ESTATE OF CAMBRIDGE REINSURANCE LIMITED, PLAINTIFFS,
v.
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, DEFENDANT. BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, DEFENDANT AND THIRD-PARTY PLAINTIFF, V. CHEROKEE INSURANCE COMPANY, CENTRAL NATIONAL INSURANCE COMPANY, NEW YORK MARINE MANAGERS, INC., OCCIDENTAL FIRE & CASUALTY COMPANY OF NORTH CAROLINA, OHIO REINSURANCE CORPORATION, AMERICAN CENTENNIAL INSURANCE COMPANY, AND SURPLUS LINES INSURANCE COMPANY, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Sprizzo, District Judge.

OPINION AND ORDER

These cross-motions for summary judgment present the question of whether it is a defense to a claim of unjust enrichment that the plaintiff was indebted to the defendant for more than the amount of the enrichment. The Court concludes that in the present case it is not and accordingly, plaintiffs' David E.W. Lines and Gerry A. Weiss, joint liquidators of Cambridge Reinsurance Limited ("Cambridge"), motion for summary judgment is granted and Defendant and Third-Party Defendant Occidental Fire and Casualty Company of North Carolina's ("Occidental") cross-motion for summary judgment is denied.

BACKGROUND

The following facts are undisputed.

Cambridge is a limited company organized under the laws of Bermuda. See Stipulation of Undisputed Facts ("Stip.") at ¶ 1. Prior to April 19, 1985, Cambridge was engaged in the business of entering into contracts of reinsurance with respect to property, casualty and other risks. On April 19, 1985 Cambridge filed a petition in the Supreme Court of Bermuda seeking a winding up of its affairs. See Stip. at ¶ 2 & Ex. A. The Bermuda Court appointed plaintiffs, David E.W. Lines and Gerry A. Weiss as liquidators on April 22, 1985 and, subsequently, on May 17, 1985, granted the company's petition and ordered that Cambridge's affairs be wound up in accordance with Bermuda law. See Stip. at ¶¶ 3, 4 & Exs. B, C.

Occidental is a corporation organized under the laws of the State of North Carolina that does business in the State of New York. See Stip. at ¶ 5. Occidental is in the business of insuring property, casualty and other risks. Id.

Prior to January 1, 1984 Cambridge and Occidental entered into four separate reinsurance agreements. See Stip. at ¶ 6. These agreements provided, inter alia, that Cambridge, as a reinsurer not admitted to do business in the United States, collateralize its obligations to Occidental for its share of outstanding losses, its share of incurred but not reported losses and its share of unearned premiums. See Stip. at ¶ 6; Affidavit of James O. Eason, Jr. ("Eason Aff.") at ¶ 7 (sworn to June 8, 1989). Cambridge elected to comply with its collateral obligations by providing Occidental with unconditional letters of credit in Occidental's favor.

Cambridge caused Bankers Trust Company to issue four unconditional and irrevocable letters of credit in order to collateralize its obligations. These letters of credit were due to expire on December 31, 1984. At the end of 1984, the Bankers Trust letters of credit were in the aggregate amount of $187,825.00. See Stip. at ¶ 7; Eason Aff. at ¶ 11. This amount was far less than Cambridge's actual collateral requirements. In fact, it was less than half of the actual collateral obligations, which by December 24, 1984 amounted to $395,650.00. See Stip. at ¶ 10; Eason Aff. at ¶¶ 11-12. Moreover, there is no dispute that Occidental had demanded that Cambridge issue an additional letter of credit or increase the existing letters of credit to meet its obligations. See Stip. at ¶ 8; Eason Aff. at ¶ 10.

On or about December 21, 1984, Cambridge caused Bank of America to issue and deliver four letters of credit in favor of Occidental, which corresponded to the four prior letters of credit from Bankers Trust. See Stip. at ¶ 11. These letters of credit were to become effective on January 1, 1985. See Stip. at ¶ 11.

On December 31, 1984, shortly before the Bankers Trust letters were due to expire, Occidental drew down upon and was paid the full amount of those letters of credit. See Stip. at ¶ 12. Thereafter, on May 10 and 16, 1985, Occidental drew upon and was paid the full amount of the new letters of credit issued by Bank of America. See Stip. at ¶ 13. Both banks credited themselves with the security that Cambridge had posted to secure the letters of credit. Thus, Occidental received the benefit of both sets of letters of credit.

On May 17, 1988, plaintiffs commenced the instant action. They originally sued Bankers Trust and Bank of America alleging that they wrongfully paid out on the letters of credit. Bank of America then brought a third-party complaint against Occidental and other insurance companies that had also drawn down on both sets of letters of credit. Plaintiffs later dropped Bankers Trust as a defendant when they filed their First Amended Complaint. On May 9, 1989 plaintiffs filed a Second Amended Complaint and asserted a claim for relief directly against Occidental. This claim was based upon equitable theories of restitution, quasi-contract, unjust enrichment and money had and received. Plaintiffs sought damages of $197,825, the proceeds of one set of letters of credit, plus interest. Occidental's answer admitted most of the relevant facts but denied liability.

DISCUSSION

Plaintiff relies upon equitable principals of quasi-contract, money had and received, unjust enrichment and constructive trust, which, under New York law,*fn1 permit a plaintiff to recover money when it has come into the defendant's hands wrongfully and it is, under the circumstances, "against good conscience for the defendant to keep the money." Parsa v. State, 64 N.Y.2d 143, 148, 474 N.E.2d 235, 237, 485 N.Y.S.2d 27, 29 (1984) (discussing action for money had and received) (quotations omitted); see Republic of Philippines v. Marcos, 806 F.2d 344, 355 (2d Cir. 1986), cert. dismissed, 480 U.S. 942, 107 S.Ct. 1597, 94 L.Ed.2d 784 (1987) (discussing constructive trusts); Simonds v. Simonds, 45 N.Y.2d 233, 241-42, 380 N.E.2d 189, 193-94, 408 N.Y.S.2d 359, 363-64 (1978) (discussing constructive trusts); Bradkin v. Leverton, 26 N.Y.2d 192, 196-97, 257 N.E.2d 643, 645, 309 N.Y.S.2d 192, 195-96 (1970) (discussing quasi-contract); Miller v. Schloss, 218 N.Y. 400, 407-08, 113 N.E. 337, 339 (1916) ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.