508 F. App'x 243
4th Cir.2013Background
- SunTrust Mortgage and United Guaranty entered into the Master Policy in 1998, insuring IOF Combo 100 loans against defaults; Master Policy excludes coverage for failures to conform to Reporting Program Guidelines.
- Flow Plans amendments in 2004 and 2005 state that SunTrust Mortgage guidelines govern underwriting and that those guidelines are currently being used and mutually agreed upon.
- Disputes arose over whether United Guaranty’s Guideline Matrix and related emails operationalized under the Flow Plans or whether SunTrust Mortgage’s own underwriting guidelines controlled.
- United Guaranty began denying IOF Combo 100 claims in 2007 for loans underwritten without Desktop Underwriter; SunTrust Mortgage filed suit in 2009 seeking breach of contract, among other things.
- The district court sanctioned SunTrust for altering emails, excluded parol evidence, and granted SunTrust summary judgment on breach of contract; a bench trial addressed first material breach and damages.
- On appeal, the Fourth Circuit affirmed in part, vacated in part (first material breach ruling), and held sanctions and evidentiary rulings proper; the concurrence would reverse on the first material breach issue and related aspects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Flow Plans interpretation governing underwriting | SunTrust argues Flow Plans unambiguously require SunTrust guidelines. | United Guaranty contends Guideline Matrix and emails establish the governing guidelines. | Flow Plans control; SunTrust guidelines govern. |
| Parol evidence and integration scope | SunTrust argues extrinsic Guideline Matrix not admissible to alter policy terms. | United Guaranty claims partial integration permits outside evidence. | Parol evidence excluded; Master Policy as amended governs. |
| First material breach and implied covenant | SunTrust contends United Guaranty’s premium collection without payment of claims breaches policy. | United Guaranty contends no basis for first material breach and that good faith/fair dealing issues were raised appropriately. | Waiver of implied covenant issue; vacate first material breach ruling. |
| Damages related to premium payments after breach finding | Damages reflect premium savings from excusing payments. | Damages should reflect premium status after breach. | Moot because first material breach vacated. |
| Sanctions and dismissal as a remedy | SunTrust seeks minimal sanctions, not dismissal. | Seeks harsher sanctions for Pettitt’s email alterations. | District court did not abuse discretion; dismissal not warranted; sanctions affirmed. |
Key Cases Cited
- Erlich v. Hendrick Const. Co., Inc., 217 Va. 108 (Va. 1976) (parol evidence and contract interpretation strictness in Virginia)
- Globe Iron Const. Co. v. First Nat’l Bank of Boston, 205 Va. 841 (Va. 1965) (plain terms govern where contract unambiguous)
- Pulaski Nat’l Bank v. Harrell, 203 Va. 227 (Va. 1962) (writing governs contract; intent in policy interpretation)
- P’ship Umbrella, Inc. v. Fed. Ins. Co., 260 Va. 123 (Va. 2000) (ambiguities construed in insured’s favor)
- Jefferson-Pilot Fire & Casualty Co. v. Boothe, 638 F.2d 670 (4th Cir. 1980) (liberal construction favoring insured when two interpretations exist)
- Joseph P. Bornstein, Ltd. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 828 F.2d 242 (4th Cir. 1987) (ambiguity resolution in favor of coverage)
- Gen. Accident Fire & Life Assurance Corp., Ltd. v. Akzona, Inc., 622 F.2d 90 (4th Cir. 1980) (summary judgment and policy ambiguity discussion)
- RW Power Partners, L.P. v. Va. Elec. & Power Co., 899 F. Supp. 1490 (E.D. Va. 1995) ( Restatement 241 factors cited for material breach)
- Silvestri v. Gen. Motors Corp., 271 F.3d 583 (4th Cir. 2001) (spoliation and sanctions standards to dismissal)
- Chambers v. NASCO, Inc., 501 U.S. 32 (Supreme Court 1991) (inherent power to sanction; dismissal as severe sanction)