                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-24-2004

Dickler v. Cigna Prop Cslty Co
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-1434




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                                                                NOT PRECEDENTIAL

                    UNITED STATES COURT OF APPEALS
                         FOR THE THIRD CIRCUIT

                                    No: 03-1434

                             STEWART DICKLER;
                            BEECH TREE RUN INC;
                            WANTAGH UNION FREE
                              SCHOOL DISTRICT

                                           v.

                        CIGNA PROPERTY AND CASUALTY
                                  COMPANY;
                        PACIFIC EMPLOYERS INSURANCE
                                  COMPANY


                          *Friends of Beth Rivka School, Inc.

                                          Appellant

                                    *{Pursuant to Rule 12(a)}

                    Appeal from the United States District Court
                      for the Eastern District of Pennsylvania
                          (Civil Action No. 90-cv-04288)
                    District Judge: Hon. Clarence C. Newcomer

                Before: McKEE, Circuit Judge, and ALDISERT and
                       GREENBERG, Senior Circuit Judges

                    Submitted under Third Circuit LAR 34.1(a)
                               September 23, 2004

                         (Opinion filed: September 24, 2004)

                                     OPINION

McKEE, Circuit Judge.
          This case has been before us five times previously. In its sixth, and we hope its

final appearance, Friends of Associated Beth Rivka School for Girls, Inc., appeals the

district court’s order finding Friends of Associated Beth Rivka School for Girls jointly

and severally liable with Machne Israel, Inc., for a reversion due under the terms of a

consent decree. For the reasons that follow, we will affirm.

                        I. FACTS AND PROCEDURAL HISTORY 1

          In 1986, Stewart Dickler, a resident of the State of New York, contracted to

purchase a former schoolhouse, the Sunrise Park Elementary School, from the Wantagh

Union Free School District in New York. However, before closing a substantial portion

of the schoolhouse was destroyed by a fire. Wantagh assigned its rights to the proceeds

of any insurance recovery to Dickler, and Dickler in turn assigned those rights to Beech

Tree Run, Inc., a corporation he formed with two associates to develop the Wantagh

property. 2

          Dickler and Beech Tree instituted suit in the district court3 against CIGNA, the

insurance carrier, to recover under the insurance policies assigned by Wantagh. The

district court initially awarded compensatory damages of $7,381,490. On appeal, we held



   1
    The rather tortured history is taken from the parties’ briefs, the district court’s prior
opinions and our prior opinions.
   2
    Beech Tree was incorporated on August 22, 1988 in the State of New York and was
dissolved voluntarily on M ay 4, 1994. It has since been reincorporated.
   3
       The district court had diversity jurisdiction pursuant to 28 U.S.C. § 1332.

                                                2
that the district court overestimated the building’s replacement cost, which we calculated

to be $5,389,208, and remanded so that the district court could subtract from that sum the

amount of physical depreciation to the building. Dickler v. Cigna Property and Cas. Co.,

957 F.2d 1088 (3d Cir. 1992).

       On remand, Dickler and Beech Tree discovered a previously undisclosed

endorsement to the policy which provided for reconstruction costs if the proceeds were to

be used to build another school. Upon Dickler’s and Beech Tree’s motion, we recalled

our mandate to permit the district court to adjudicate Dickler’s and Beech Tree’s claims

under the reconstruction endorsement and for punitive damages based on a fraudulent

concealment theory. Dickler v. Cigna Property and Cas. Co., Nos. 91-1302/1357.

CIGNA settled these additional claims on June 23, 1993, for $3,600,000. The settlement

agreement did not allocate the sum as between the reconstruction endorsement claim and

the punitive damages claim.

       However, before CIGNA settled, Dickler and Beech Tree, on August 27, 1992,

assigned their rights to any recovery pursuant to the reconstruction endorsement claim

(but not pursuant to the punitive damages claim) to Machne Israel, Inc., and Friends of

Associated Beth Rivka Schools, Inc., subject to the terms and conditions of an agreement

executed at the same time as the assignment. Under the assignment, Dickler and Beech

Tree assigned:

       as a contribution to [M achne Israel and Beth Rivka] all of [its] rights, title
       and interest in and to any and all proceeds now due or to become due from

                                              3
       CIGNA pursuant to the right to rebuild as a result of the fire on June 17,
       1988 to [Machne Israel and Beth Rivka] as those proceeds have been
       determined or may be determined by the United States District Court for the
       Eastern District of Pennsylvania . . . and by the Third Circuit Court of
       Appeals . . . .

The assignment was made subject to the terms and conditions of an Agreement executed

on the same day as the assignment. The August 27, 1992 Agreement provided that

Machne Israel and Beth Rivka would “use the proceeds assigned to construct a school in

the Crown Heights section of Brooklyn, New York containing approximately 54,000

square feet . . . and that the School shall be . . . named in honor of Dr. Abraham and

Pauline Kates and Dr. Edward Wasserman . . . .” Finally, the August 27, 1992 agreement

stated that “[s]hould . . . a recovery from CIGNA be obtained as a result of this

assignment and no school be built and/or no school named as aforesaid be built with the

proceeds . . ., Lewis Kates shall be paid a fee for services rendered equal to 35% of the

gross recovery obtained.” Lewis Kates was the attorney for Dickler and Beech Tree.

The Agreement contained no time constraints regarding the start of construction of the

school or its completion.

       On June 23, 1993, after settling the insurance coverage dispute with CIGNA,

Dickler and Beech Tree entered into a stipulation with Machne Israel allocating the

proceeds between monies attributable to the reconstruction endorsement claim and those

attributable to the punitive damages claim. The Proceeds Stipulation provided that

Dickler and Beech Tree would retain $725,000, attributed to the punitive damages claim,



                                             4
and that there

       shall be paid to Machne Israel, Inc., the gross sum of $2,875,000.00 for the
       sole purpose of completing the construction of a certain school building in
       Crown Heights, Brooklyn, New York which is to be named and known as
       the “Dr. Abraham and Pauline Kates and Dr. Edward Wasserman
       Building[”] of the Campus CHOMESH Beth Rivka School and for no other
       purpose and name. Should construction of the said school not be
       recommenced on or before June 1, 1994, and not be completed, so named
       and placed in use as a school by December 31, 1995, this gift shall lapse
       and the net proceeds of this gift . . . shall be repaid by Machne Israel, Inc. to
       Beech Tree Run, [I]nc.

The Proceeds Stipulation also provided that

       Lewis Kates and Lewis Kates Law Offices waive their fee, which is agreed
       to be 35% of the gross recovery allocated and given to Machne Israel, Inc.
       so long as all of the conditions concerning the construction and naming of
       the school building . . . be complied with. Should there be a failure to
       comply with any of the condition[s], Machne Israel, Inc. shall forthwith pay
       the Lewis Kates a fee of $997,500.00 plus interest on said sum computed at
       6% per annum from July 1, 1993 to the date of payment.

Machne Israel was a signatory to the Proceeds Stipulation, but Beth Rivka was not.

       By order dated June 24, 1993, the district court approved the Proceeds Stipulation

subject to our approval. We approved the Proceeds Stipulation by order dated July 2,

1993. In a subsequent appeal, we referred to the Proceeds Stipulation as “the functional

equivalent of a consent decree.” Dickler v. Cigna Property and Cas. Co., No. 98-1325

(3d Cir. July 15, 1999), slip op. at 5.

       On January 26, 1996, Dickler and Beech Tree, joined by Kates, moved the district

court to enforce the Proceeds Stipulation, arguing that the construction of the school had

not been completed as required by the conditions set forth in the Proceeds Stipulation.

                                               5
The district court exercised its equitable powers to modify the Proceeds Stipulation to

provide for a completion date of May 15, 1997, and declined to award the relief sought by

Dickler, Beech Tree and Kates. They appealed and we affirmed the district court’s

exercise of its equitable authority to reform the Proceeds Stipulation. Dickler v. Cigna

Property and Cas. Co., No. 96-1809 (3d Cir. 1997).

          In October 1997, Dickler, Beech Tree and Kates once again moved the district

court to enforce the modified Proceeds Stipulation, alleging that the construction of the

school had not been completed by the extended deadline. This time the district court

agreed with Dickler and Beech Tree. On March 19, 1998, it entered an order (the

“Enforcement Order”) directing Beth Rivka to repay Beech Tree the sum of $1,877,500

and to pay the executors of Kates’s estate 4 the sum of $997,500 plus interest as set forth

in the Proceeds Stipulation.

          Beth Rivka appealed the Enforcement Order, but we affirmed the district court,

rejecting its argument (raised for the first time on appeal) that the reversionary clauses in

the Proceeds Settlement were unenforceable penalties and holding that the district court

did not err by enforcing the terms of the agreements between the parties. Dickler v.

Cigna Property and Cas. Co., No. 98-1325 (3d Cir. July 15, 1999).

          When Beech Tree attempted to execute on the judgment, it discovered that the writ

of execution would be ineffective because the subject property was being held not only in



   4
       Kates died on January 11, 1998, before the district court disposed of the motion.

                                                6
Beth Rivka’s name, but also in the names of various Beth Rivka-related entities.

Consequently, Beech Tree moved the district court, pursuant to Fed.R.Civ.P. 60, to

amend the Enforcement Order it entered on March 19, 1998 by adding the names of the

Beth Rivka-related entities. However, the district court never addressed the motion to

amend on the merits as to the Beth Rivka-related entities. Instead, on August 16, 2001, it

issued an order (the “Jurisdictional Order”) granting an intervening motion by Beth Rivka

to vacate the Enforcement Order against it for lack of jurisdiction. Beth Rivka contended

that because it was, like Dickler and Beech Tree, a New York entity, its presence made

the parties non-diverse and destroyed the district court’s diversity jurisdiction. Beth

Rivka also argued that because it was not a party to the Proceeds Stipulation, the district

court lacked jurisdiction over it. The district court agreed with Beth Rivka and vacated

the Enforcement Order to the extent it required repayment by Beth Rivka.5

       Beech Tree appealed the Jurisdictional Order. We reversed, finding that Beth

Rivka’s presence did not negate diversity of citizenship, and ordered reinstatement of the

Enforcement Order holding Beth Rivka liable for the reversion. Dickler v. Cigna

Property and Cas. Co., No. 01-3534 (3d Cir. October 4, 2002).

       Subsequently, the district court entered an order on January 24, 2003, holding Beth



   5
    However, the district court did, as Beech Tree requested in its Rule 60 motion, amend
the Enforcement Order to require Machne Israel, Inc., to repay Beech Tree the amount of
$1,877,500 and to pay the executors of Kates’s estate the amount of $997,000 plus
interest as required by the Proceeds Stipulation.


                                              7
Rivka and Machne Israel, Inc., “jointly and severally” liable for the reversion.6 Beth

Rivka then filed a timely appeal. 7

                                      II. DISCUSSION

       Beth Rivka frames the issue on appeal as follows:

       Did the [district court] err in entering an order finding Machne Israel, Inc.
       and Friends of Associated Beth Rivka “jointly and severally liable” on a
       judgment not in tort without making any factual findings regarding the
       relationship between Machne Israel, Inc. and Friends of Associated Beth
       Rivka?

In framing the issue this way, Beth Rivka is really making a claim that it is not liable to

repay the entire amount of the reversion pursuant to the terms of the Proceeds Stipulation.

But, because Beth Rivka has never raised the issue of apportionment of liability in the

district court, the time for making that claim has long since passed.

       On March 19, 1998, the district court entered the Enforcement Order, directing


   6
    On May 8, 2003, the district court issued an order placing the case and all outstanding
motions in “CIVIL SUSPENSE pending the Third Circuit’s disposition” of Beth Rivka’s
appeal. Further, on October 20, 2003, the district court issued an order vacating that part
of the January 23, 2003 order “to the extent that it grants relief to the executors of the
Estate of Lewis Kates and Lewis Kates Law Offices.” The order noted: “This Order is
based on the acknowledgment by the Estate of Lewis Kates, Lewis Kates Law Office, and
Machne Israel of Philadelphia that the terms of the Proceeds Stipulation have been met or
waived as they relate to the Kates Parties.”
   7
    For the sake of completeness, we note that Machne Israel filed a petition for
mandamus with us seeking relief from the Enforcement Order as amended by the district
court on August 16, 2001. See n.5, supra. We denied the petition, holding that any
request by Machne Israel for relief from the Enforcement Order against it had to be
addressed to the district court in the first instance. In re: Machne Israel, Inc., No. 02-
1962 (3d Cir. October 4, 2002).


                                              8
Beth Rivka alone to make the reversion payments in accordance with the terms of the

Proceeds Settlement. Beth Rivka appealed that order, but we affirmed the district court in

July of 1999. Significantly, not once during the period of time prior to the district court’s

Enforcement Order and before our affirmance of the Enforcement Order did Beth Rivka

claim that Machne Israel might be partially liable for the reversionary payment. In fact, in

the district court, Beth Rivka conceded that any distinction between it and Machne Israel

was of no consequence. In a submission in opposition to Dickler’s and Beech Tree’s

second motion to enforce the Proceeds Stipulation, which precipitated the Enforcement

Order, Beth Rivka represented:

       The owner of the school building under construction is and was Friends of
       Associated Beth Rivka School for Girls, Inc. (formerly named Friends of
       Beth Rivka School for Girls, Inc.). The averments regarding Machne Israel
       vs. Beth Rivka are irrelevant since the school, which was the intended
       recipient of the gift, is the very school which is now completed. (emphasis
       added).

       Furthermore, when we reversed the district court’s August 16, 2001 Jurisdictional

Order on October 4, 2002, we ordered reinstatement of the March 19, 1998 Enforcement

Order directing Beth Rivka to pay the full amount of the reversion. In that order, we

directed the district court to “entertain the applications before it.” However, on remand,

Beth Rivka never applied to the district court seeking an apportionment of liability

between it and M achne Israel.8 Not did it move for relief under Fed.R.Civ.P. 60(b) after



   8
    By way of an aside, we question, but do not decide, Beth Rivka’s standing to contest
the district court’s imposition of joint and several liability on it and Machne Israel. We

                                              9
the district court entered the order imposing joint and several liability.

       Absent exceptional circumstances, an issue not raised in the district court will not

be heard on appeal. Fleck v. KDI Sylvan Pools, Inc., 981 F.2d 107, 116 (3d Cir. 1992).

Exceptional circumstances exist when the public interest requires that the issue be heard

or when a manifest injustice would result from the failure to consider the new issue. Id.

(citation omitted). Since Beth Rivka has conceded that any distinction between it and

Machne Israel is irrelevant, we find no exceptional circumstances that warrant

considering the issue Beth Rivka has raised for the first time on appeal.

                                    III. CONCLUSION

       For the above reasons, we will affirm the order of the district court.




have twice held that Beth Rivka is solely liable for the reversionary payment.
Accordingly, as a theoretical matter, it seems to us that Machne Israel is the party harmed
by the district court’s imposition of joint and several liability. Therefore, it may be that
the appropriate party to raise the issue of joint and several liability is Machne Israel, not
Beth Rivka. Indeed, Machne Israel attempted to seek relief from the Enforcement Order
by way of a petition for mandamus, which we denied. See n.7, supra.


                                              10
