USCA11 Case: 19-14689 Date Filed: 06/23/2022 Page: 1 of 7
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 19-14689
____________________
ESTATE OF PHYLLIS M. MALKIN,
By its Personal Representative, Toni Ellen Guarnero,
Plaintiff-Counter Defendant-
Appellee-Cross Appellant,
versus
WELLS FARGO BANK, NA,
as Securities Intermediary,
Defendant-Third Party Plaintiff-
Appellant-Cross Appellee,
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2 Opinion of the Court 19-14689
BERKSHIRE HATHAWAY LIFE INSURANCE
COMPANY OF NEBRASKA,
Defendant-Counter Claimant-
Appellant-Cross Appellee.
____________________
Appeals from the United States District Court
for the Southern District of Florida
D.C. Docket No. 1:17-cv-23136-MGC
____________________
Before GRANT and BRASHER, Circuit Judges.1
PER CURIAM:
The relevant facts of this appeal are set out in Estate of
Malkin v. Wells Fargo Bank, NA, 998 F.3d 1186 (11th Cir. 2021).
To briefly summarize here, the district court found Berkshire
Hathaway Life Insurance Company of Nebraska and Wells Fargo
Bank, N.A. liable to Phyllis Malkin’s estate for the proceeds of a $4
million life insurance policy from American General Life Insurance
Company. See id. at 1190. The court concluded that the policy
was an illegal stranger-originated life insurance (“STOLI”) policy
that was void under Delaware’s insurable interest statute,
Delaware Code Annotated Title 18, § 2704(a). Id. On appeal,
1 This opinion is being issued by a quorum. See 28 U.S.C. § 46(d).
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19-14689 Opinion of the Court 3
Berkshire and Wells Fargo challenged that finding along with the
district court’s conclusion that Delaware’s Uniform Commercial
Code did not provide them with affirmative defenses against
liability under § 2704(b). Id. at 1193, 1198. Berkshire also argued
that the court incorrectly dismissed its counterclaims against the
estate for unjust enrichment, fraudulent misrepresentation, and
negligent misrepresentation. Id. at 1199. The estate cross-appealed
to challenge the district court’s calculation of prejudgment interest.
Id. at 1201.
In our previous decision, we held that the district court
properly found the insurance policy void as an illegal STOLI policy.
Id. at 1198. We also vacated the dismissal of Berkshire’s
misrepresentation counterclaims. Id. at 1201. But we concluded
that other arguments raised novel issues of Delaware law, so we
certified two questions to the Delaware Supreme Court:
1. If an insurance contract is void under Del. Code. Ann. tit.
18, § 2704(a) and PHL Variable Insurance Co. v. Price
Dawe 2006 Insurance Trust, ex rel. Christiana Bank &
Trust Co., 28 A.3d 1059, 1073 (Del. 2011), is the party
being sued under § 2704(b), as a third-party purchaser of
the contract and holder of the proceeds, entitled to assert
either a bona fide purchaser defense under Del. Code
Ann. tit. 6, § 8-502, or a securities intermediary defense
under Del. Code Ann. tit. 6, § 8-115?
2. If an insurance contract is void under Del. Code Ann. tit.
18, § 2704(a) and PHL Variable Insurance Co. v. Price
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4 Opinion of the Court 19-14689
Dawe 2006 Insurance Trust, ex rel. Christiana Bank &
Trust Co., 28 A.3d 1059, 1073 (Del. 2011), can the party
that is being sued under § 2704(b) recover premiums it
paid on the void contract?
Id. at 1202. We reserved judgment on the issue relating to
prejudgment interest pending the Delaware Supreme Court’s
answers. Id. at 1201.
This case now returns to us from the Delaware Supreme
Court, which answered both of our questions. See Wells Fargo
Bank, N.A. v. Est. of Malkin, No. 172, 2021, 2022 WL 1671966 (Del.
May 26, 2022). It answered the first question in the negative,
explaining that “in the sui generis context of STOLI schemes,” the
UCC defenses are not available. Id. at *1. The court reasoned that
defendants to an action under § 2704(b) “do not face an ‘adverse
claim’ as the Delaware UCC defines that term.” Id. It answered
the second question in the affirmative, stating that a party can
recover premiums that it paid on the void contract if it “can prove
its entitlement to those premiums under a viable legal theory.” Id.
We thank the Delaware Supreme Court for its answers,
which largely resolve this appeal. In light of the answers, we
conclude that the district court properly rejected the defendants’
UCC defenses and affirm that decision. We also conclude that the
district court erred by dismissing Berkshire’s unjust enrichment
counterclaim on the ground that Delaware law cannot support an
equitable cause of action in this context. See Est. of Malkin, 998
F.3d at 1199. We vacate that dismissal and remand for further
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19-14689 Opinion of the Court 5
consideration of the claim, including whether Berkshire can
“establish the elements” of unjust enrichment. Wells Fargo, 2022
WL 1671966, at *14.
We now turn to the estate’s cross-appeal of the prejudgment
interest award. When the calculation of prejudgment interest
depends on the construction of state law, we review it de novo.
SEB S.A. v. Sunbeam Corp., 476 F.3d 1317, 1319 (11th Cir. 2007).
The district court determined that prejudgment interest should run
from October 31, 2017, when the estate served Wells Fargo with
its complaint. The estate argues that the correct accrual date is
October 29, 2014, when the insurance company paid out the policy
proceeds to Berkshire. Est. of Malkin, 998 F.3d at 1201.
We agree with the district court’s calculation. As this Court
recognized in Sun Life Assurance Co. of Canada v. U.S. Bank
National Ass’n, the “general rule in Delaware is that interest starts
on the date when payment should have been made.” 693 F. App’x
838, 841 (11th Cir. 2017) (unpublished) (quotations omitted).
There are two rules guiding this principle, each depending on the
type of claim the plaintiff asserts. “In cases where the claimant
demands payment from the defendant, but the defendant
wrongfully refuses, prejudgment interest accrues from the date of
the defendant’s refusal.” Id. But where “the claimant seeks a
refund of payments it never should have made, prejudgment
interest accrues from the date of the claimant’s payments.” Id.
The estate contends that it falls in the second category,
which is the one this Court concluded applied to U.S. Bank in Sun
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Life. See id. But in that case, U.S. Bank sought “the refund of
premium payments that it never should have made because the
Policy was void from its inception.” Id. Here, however, the estate
is not seeking to recover anything it paid. It instead claims to be
entitled to the policy proceeds that were paid by the insurance
company. The estate’s claim therefore falls under the first rule, and
the district court did not err by calculating prejudgment interest
from October 31, 2017, when the estate demanded payment of the
policy proceeds. 2
Finally, we do not consider Wells Fargo’s argument that it
should not be liable under § 2704(b) because it did not keep the
policy proceeds for itself. In its ruling on the parties’ summary
judgment motions, the district court expressly left undecided “the
apportionment of damages between Berkshire and Wells Fargo.”
In a joint status report that followed, the parties stated that “all
claims, defenses, and counterclaims raised in their various
pleadings have been resolved,” and agreed, with the exception of
certain unresolved motions, that “the matter is otherwise ripe for
the entry of a final judgment in favor of the Estate, jointly and
severally against Defendants.” Wells Fargo therefore waived its
argument against joint and several liability. 3
2The estate does not challenge the district court’s finding that the defendants’
refusal occurred on October 31, 2017.
3 As the Delaware Supreme Court noted, other avenues may provide a
securities intermediary with protection from ultimate liability, “such as
general principles of agency law or its contract with its customer.” Wells
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* * *
We AFFIRM the district court’s judgment in favor of the
estate on its § 2704(b) claim against Berkshire and Wells Fargo and
the court’s calculation of prejudgment interest. We VACATE the
dismissal of Berkshire’s unjust enrichment counterclaim and
REMAND to the district court for further proceedings consistent
with this opinion and that of the Delaware Supreme Court.
Fargo Bank, N.A. v. Est. of Malkin, No. 172, 2021, 2022 WL 1671966, at *10
(Del. May 26, 2022).