645 F. App'x 387
6th Cir.2016Background
- BB&T (trustee) assigned a Pacific Life variable life insurance policy on behalf of an irrevocable trust to John Hancock to effect a 1035 exchange; John Hancock sent a signed surrender request to Pacific Life, received at Pacific Life’s home office on Sept. 9, 2008.
- Pacific Life’s policy required a "written request" satisfactory to Pacific Life to surrender the policy; Pacific Life accepted Squire’s authority but refused to process the surrender because it found the prior trustee signature (Koczot) on the assignment lacked notarization or corporate seal and thus was not "satisfactory."
- Pacific Life mailed form letters requesting notarization/seal to John Hancock (not copying BB&T), causing BB&T to be unaware of the demand; market losses reduced the policy cash value between Sept. 9 and Oct. 1.
- BB&T delayed providing the requested authentication until Dec. 11, 2008, then completed the exchange; the cash value had fallen substantially, producing a realized loss of $259,926.33.
- BB&T sued Pacific Life for breach of contract; district court initially granted summary judgment for BB&T but this court reversed and remanded, holding reasonableness of Pacific Life’s demand was a factual issue. On remand, a jury found for BB&T; the district court awarded damages plus pre- and post-judgment interest. This appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pacific Life breached by refusing to accept John Hancock’s surrender request absent notarization/seal on prior assignment | BB&T: Policy requires only an owner-signed "written request" satisfactory to Pacific Life; John Hancock was the owner and its surrender was satisfactory; Pacific Life unreasonably demanded additional authentication on Koczot’s signature | Pacific Life: It properly exercised contractual discretion to demand that additional authentication be "satisfactory to Pacific Life" before surrendering; its correspondence was directed to the policy owner (John Hancock) | Court: Affirmed jury verdict for BB&T — Pacific Life was judicially estopped from denying John Hancock’s ownership and reasonableness was a jury question previously resolved for BB&T on remand; judgment affirmed. |
| Whether Pacific Life is judicially estopped from now arguing BB&T (not John Hancock) was the owner | BB&T: Pacific Life previously asserted John Hancock was owner at summary judgment and on appeal; it is estopped from reversing position | Pacific Life: Seeks to re-characterize ownership to argue trial error | Held: Judicial estoppel applies — Pacific Life is bound by its prior successful position that John Hancock was the owner. |
| Whether BB&T had a duty to mitigate by acquiescing and promptly providing notarization/seal to avoid market losses | Pacific Life: BB&T should have mitigated by providing the requested authentication earlier (e.g., Oct. 1) to limit losses | BB&T: Mitigation does not require agreeing to an unreasonable unilateral demand or making a new contract with the breaching party | Held: No duty to mitigate by acceding to an unreasonable demand; mitigation not required here. |
| Whether district court erred in awarding pre- and post-judgment interest at Kentucky statutory rates | Pacific Life: Kentucky law governs interest; award should be reversed or recalculated | BB&T: Pacific Life waived this issue by not appealing interest earlier | Held: Issue waived — Pacific Life failed to raise interest on initial appeal; concurrence notes post-judgment interest is governed by federal law. |
Key Cases Cited
- Reynolds v. Comm’r, 861 F.2d 469 (6th Cir. 1988) (judicial estoppel requires prior judicial acceptance of a party’s prior position)
- Farmers Bank & Capital Tr. Co. v. Nw. Mut. Life Ins. Co., 891 S.W.2d 413 (Ky. Ct. App. 1995) (addressing insurer obligations on policy surrender/notice)
- Jones v. Marquis Terminal, Inc., 454 S.W.3d 849 (Ky. Ct. App. 2014) (plaintiff’s duty to mitigate damages limited by reasonableness)
- Ten Broeck Tyre Co. v. Rubber Trading Co., 217 S.W. 345 (Ky. 1919) (injured party not required to enter into a new contract with breaching party to mitigate)
- Hirsch v. Ga. Iron & Coal Co., 169 F. 578 (6th Cir. 1909) (mitigation does not require yielding to wrongful demands)
- JGR, Inc. v. Thomasville Furniture Indus., Inc., 550 F.3d 529 (6th Cir. 2008) (failure to raise an issue on appeal waives that issue on remand)
- Broad St. Energy Co. v. Endeavor Ohio, LLC, 806 F.3d 402 (6th Cir. 2015) (federal law controls post-judgment interest)
- Estate of Riddle v. S. Farm Bur. Life Ins. Co., 421 F.3d 400 (6th Cir. 2005) (in diversity cases, state law governs prejudgment interest; federal law governs postjudgment interest)