Maldonado-Vinas v. National Western Life Ins Co , 862 F.3d 118 ( 2017 )

United States Court of Appeals
For the First Circuit
No. 16-1737
DAMARIS MALDONADO-VIÑAS; JUAN CARLOS IGLESIAS-MALDONADO;
and JOSÉ CARLOS IGLESIAS-MALDONADO,
Plaintiffs, Appellees,
v.
NATIONAL WESTERN LIFE INSURANCE COMPANY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Camille L. Vélez-Rivé, U.S. Magistrate Judge]
Before
Torruella, Lipez, and Barron,
Circuit Judges.
Salvador J. Antonetti-Stutts, with whom Carla García-Benítez,
Alejandro J. García-Carballo, and O'Neill & Borges, LLC were on
brief, for appellant.
José A. Hernández-Mayoral, for appellees.
June 29, 2017
TORRUELLA, Circuit Judge. Defendant-appellant National
Western Life Insurance Co. ("National Western") appeals from a
judgment in favor of Plaintiffs Damaris Maldonado-Viñas
("Maldonado"), Juan Carlos Iglesias Maldonado, and José Carlos
Iglesias Maldonado (collectively, "Plaintiffs") that invalidated
two life insurance annuity policies. National Western argues that:
(1) the beneficiary of the two annuities was a necessary party
under Fed. R. Civ. P. 19, even though National Western had already
paid him; (2) one annuity policy was not void even though the
application was not executed in accordance with National Western's
internal policies; and (3) the second annuity policy was not void
under Puerto Rico law solely because it was processed by an
insurance agent who was not licensed by the Office of the
Commissioner of Insurance of the Commonwealth of Puerto Rico.
We vacate the judgment and remand for further findings
concerning the necessity of joining the beneficiary under Rule 19.
I. BACKGROUND
A. Factual Background
At the time of his death on November 2, 2011, Carlos
Iglesias-Álvarez ("Carlos"1 or "the decedent") had been married to
Maldonado for about twenty-two years. Plaintiffs Juan Carlos
1 We use "Carlos" to distinguish the decedent from his brother,
Francisco Iglesias-Álvarez, who we call "Francisco" for the same
reason. We mean no disrespect to either.
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Iglesias Maldonado and José Carlos Iglesias Maldonado are the
children of Maldonado and Carlos. Plaintiffs are Carlos's legal
heirs.
This case primarily concerns defects in the execution of
two life insurance annuity policies which Carlos purchased through
National Western. On April 30, 2011, Carlos purchased a life
insurance policy through National Western ("Annuity No. 1"). Two
days later, on May 2, 2011, Carlos purchased a second policy. Due
to issues with the execution of that policy, it was cancelled by
National Western and reissued ("Annuity No. 2"). Under both
policies, Carlos named his brother, Francisco Iglesias-Álvarez
("Francisco") as the sole beneficiary.
Carlos paid $1,467,500 each, a total of $2,935,000, for
the annuities. Both policies contained defects in their execution.
The agent who issued Annuity No. 1 on National Western's behalf
was not licensed by Puerto Rico Office of the Commissioner of
Insurance. Annuity No. 2 was not executed in accordance with
National Western's internal policies. Despite these defects,
National Western issued the two policies on April 30, 2011 and
June 7, 2011.
After Carlos's death on November 2, 2011, Francisco
mailed a claim form to National Western seeking benefits from
Annuity No. 2. National Western informed Francisco that he was
also the beneficiary of Annuity No. 1 and that he needed to submit
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a second claim form and some additional information. Francisco
mailed the requested information on February 9, 2012. National
Western paid Francisco the benefits from the annuities on
February 23, 2012 and March 13, 2012.
On April 24, 2015, three years after National Western
had paid Francisco the benefits from the annuities and more than
a year after Plaintiffs sued National Western, Francisco submitted
a document in which he claimed to be "Francisco J. Iglesias," the
owner of Annuity No. 2, and attempted to ratify the policy. All
communications were between Francisco's residence in Spain and
Western National's office in Texas.
B. Procedural History
Plaintiffs sued National Western in the U.S. District
Court for the District of Puerto Rico on March 11, 2014, seeking
a declaration that the policies were void and a return of the
premiums paid by Carlos. On May 12, 2014, National Western filed
a motion to dismiss because Plaintiffs failed to join a necessary
party, Francisco. The district court issued an Opinion and Order
denying that motion on November 10, 2014. Shortly after, National
Western answered the complaint and filed a motion for
reconsideration, which the district court also denied.
On December 16, 2015, the parties filed motions for
summary judgment. On March 31, 2016, a magistrate judge granted
Plaintiffs' motion for summary judgment and denied National
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Western's motion. National Western's motion for reconsideration
was denied on May 5, 2016. National Western timely appealed.
II. ANALYSIS
Federal Rule of Civil Procedure 19(a), "Persons Required
to Be Joined if Feasible," states:
(1) Required Party. A person who is subject to service
of process and whose joinder will not deprive the court
of subject-matter jurisdiction must be joined as a party
if:
(A) in that person's absence, the court cannot accord
complete relief among existing parties; or
(B) that person claims an interest relating to the
subject of the action and is so situated that
disposing of the action in the person's absence may:
(i) as a practical matter impair or impede the
person's ability to protect the interest; or
(ii) leave an existing party subject to a
substantial risk of incurring double, multiple, or
otherwise inconsistent obligations because of the
interest.
If a court determines that a person must be joined if feasible, it
then must determine whether doing so is actually feasible under
Rule 19(b). "If a person who is required to be joined if feasible
cannot be joined, the court must determine whether, in equity and
good conscience, the action should proceed among the existing
parties or should be dismissed." Fed. R. Civ. P. 19(b).
The district court ruled that Francisco was not
"required to be joined if feasible"2 under Rule 19(a), and so it
2 Parties who are "required to be joined if feasible" are still
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did not analyze whether it would be feasible to join him under
Rule 19(b). We review both Rule 19(a) and Rule 19(b) determinations
under an abuse of discretion standard. Picciotto v. Cont'l Cas.
Co., 512 F.3d 9, 14-15 (1st Cir. 2008). Thus, we will reverse
"only if 'the district court makes an error of law or relies
significantly on an improper factor, omits a significant factor,
or makes a clear error of judgment in weighing the relevant
factors.'" Jiménez v. Rodríguez-Pagán, 597 F.3d 18, 24 (1st Cir.
2010) (quoting Picciotto, 512 F.3d at 15).
Relying on Delgado v. Plaza Las Américas, Inc., 139 F.3d
1 (1st Cir. 1998), the district court ruled that even though
National Western "would certainly have paid out double on the
annuities" if two different courts reached different conclusions
about whether the policies were void, that would not subject it to
double obligations. In Delgado, a woman sued a shopping center in
state court after she was raped on the shopping center's premises.
Id. at 2. Separately, her father brought a diversity action in
federal court seeking damages for the emotional pain he suffered
as a result of his daughter's rape. Id. The district court ruled
that the daughter must be joined if feasible under Rule 19(a)
sometimes called "necessary," even though Rule 19 no longer uses
the term "necessary," Picciotto v. Cont'l Cas. Co., 512 F.3d 9, 15
n.10 (1st Cir. 2008), and they are not literally necessary because
suits may continue without such parties if doing so would be
equitable under Rule 19(b). See id. at 15.
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because otherwise the shopping center might face inconsistent
obligations. Id. It reasoned that the shopping center might be
found liable to the father in the federal action, but not to the
daughter in the state action, or vice versa, even though the
father's claims were derivative of the daughter's. Id. at 3. We
reversed, reasoning that:
where two suits arising from the same incident involve
different causes of action, defendants are not faced
with the potential for double liability because
separate suits have different consequences and
different measures of damages . . . [and] the mere
possibility of inconsistent results in separate
actions does not make the plaintiff in each action a
necessary party to the other.
Id.
Rule 19(a)(1)(B)(ii) requires the joinder of a person if
feasible where that unjoined person's interest creates a
substantial risk that an existing party will be subject to double
or multiple obligations. There was no such risk in Delgado for a
very simple reason: even if the absent daughter had been joined,
the shopping center may well have been liable to both the father
and the daughter. The shopping center's complaint was that it
might be liable to one or the other, when logically it should only
be liable to both or neither. The fact that the case was divided,
however, could never result in it owing obligations to more parties
than it ever would in a single action. Thus, the absent daughter's
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interest could not increase the shopping center's potential
liability from the incident as a whole.
Here, however, Francisco's interest might do just that.
In a single action, the policies could never be void as to
Plaintiffs -- thus obliging National Western return the premiums
-- but not void as to Francisco -- thus obliging National Western
to pay him benefits. But where, as here, Francisco is not a party,
National Western may well be subject to both obligations. The
issue is not that two courts may reach inconsistent conclusions,
it is that by reaching those conclusions, National Western may be
subject to double obligations.
The district court, however, reasoned that National
Western might be unable to recover from Francisco even if the
policies were void because Francisco "could possibly assert a
defense that but for National Western's negligence, the annuities
would have remained valid." If National Western could never obtain
a return of the benefits it paid to Francisco even if the policies
are void, then it would not, in fact, be subject to double
obligations. Rather, it would owe an obligation to Plaintiffs
because the policies were void, but it would be unable to collect
from Francisco because of its own negligence, an entirely different
theory, and one that could apply in either a consolidated or a
separate case.
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Neither the district court nor Plaintiffs, however, cite
any authority to support the district court's assertion.3 We have
not found any Puerto Rico case directly on point, but "[a]s a
general rule, if an insurer pays a loss as a result of fraud or a
mistake as to facts which would have been a sufficient defense in
an action by the insured upon the policy, the money so paid may be
recovered." Steven Plitt, et al., 16 Couch on Ins. § 226:50 (3d
ed. 2017); see also id. § 226:80 (collecting cases allowing
recovery of benefits mistakenly paid to incorrect parties); Glover
v. Metro. Life Ins. Co., 664 F.2d 1101, 1103 (8th Cir. 1981)
(requiring party mistakenly paid as beneficiary to return payment,
even though insurance company had constructive knowledge that
another party might have been the true beneficiary when it made
the payment). Francisco's alternative defenses are therefore no
sure thing, and he would almost certainly argue that the policies
are not void in any separate action. In addition, although the
district court found that the policies were void, there remains a
3 National Western argues that, under P.R. Laws Ann. Tit. 31,
§ 3514, Francisco must return any benefits he received if the
policies are void. P.R. Laws Ann. Tit. 31, § 3514 states that
"[w]hen the nullity of an obligation has been declared, the
contracting parties shall restore to each other the things which
have been the object of the contract." Although a vested
beneficiary has "personal rights stemming from the contract,"
however, the beneficiary is "not a party to the contract."
Fernández Vda. de Alonso v. Cruz Batiz, No. CE-90-842, 128 D.P.R.
493, Slip op. at 4 (P.R. June 6, 1991). P.R. Laws Ann. Tit. 31,
§ 3514 therefore seems inapplicable.
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"substantial risk" that a different court would decide otherwise,
and so subject National Western to "double . . . obligations."
Fed. R. Civ. P. 19(a)(1)(B)(ii).
"[I]t is the object of courts to prevent the payment of
any debt twice over." Harris v. Balk, 198 U.S. 215, 226 (1905).
Rule 19(a)(1)(B)(ii)'s preference for the joinder of parties in
order to avoid double or multiple obligations furthers that
purpose. Because, as the district court recognized, National
Western might have to "pa[y] out double on the annuities," and
there is a substantial risk that this would occur if Francisco was
not joined, Francisco was a person required to be joined if
feasible under Rule 19(a).4
Because Francisco was a person required to be joined if
feasible under Rule 19(a), and the parties agree that he could not
feasibly be joined because the district court lacked personal
jurisdiction over him, the district court should have
"determine[d] whether, in equity and good conscience, the action
should [have] proceed[ed] among the existing parties or should
4 In factually analogous circumstances, the Sixth Circuit has also
held that a third party, who had already been paid by the
defendant, was a required party under Rule 19(a), although it did
so because it reasoned that a court could not otherwise afford
complete relief among the parties. Soberay Mach. & Equip. Co. v.
MRF Ltd., 181 F.3d 759, 764 (6th Cir. 1999). Specifically, the
Sixth Circuit found that if the defendant was liable to the
plaintiff, the defendant "would [be] required to seek relief
against [the absent party]." Id.-10-
[have been] dismissed." Fed. R. Civ. P. 19(b). The district
court, however, never reached this step.
The parties' briefs contain some discussion of the Rule
19(b) analysis. We grant deference to a district court's Rule
19(b) determinations, however, Picciotto, 512 F.3d at 14-15, and
the decision is ultimately an equitable one, "steeped in pragmatic
considerations." B. Fernández & Hnos, Inc. v. Kellogg USA, Inc.,
516 F.3d 18, 23 (1st Cir. 2008) (quoting In re Olympic Mills Corp.,
477 F.3d 1, 9 (1st Cir. 2007)). Here, the district court has not
exercised its discretion. Nor has it made findings on important
issues such as whether another court in Texas, Spain, or elsewhere
could obtain jurisdiction over both National Western and
Francisco, and so provide Plaintiffs with an adequate remedy in
another forum. We therefore decline to reach the Rule 19(b) issue
in the first instance.
III. CONCLUSION
Because Francisco was a person required to be joined if
feasible under Rule 19(a), we vacate the district court's judgment
and remand to the district court to determine whether it is
nevertheless equitable for the case to proceed without him. Each
party is to bear its own costs.
VACATED and REMANDED.
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