Federal Insurance Company v. Summers

• Decision Date: 06 November 1968
• Docket Number: No. 7124.,7124.
• Citation: 403 F.2d 971
• Parties: FEDERAL INSURANCE COMPANY, Plaintiff, Appellant, v. Harry SUMMERS, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

403 F.2d 971 (1968)

FEDERAL INSURANCE COMPANY, Plaintiff, Appellant, v. Harry SUMMERS, Defendant, Appellee.

No. 7124.

United States Court of Appeals First Circuit.

November 6, 1968.

James C. Heigham, with whom Robert S. Frank, Jr., and Choate, Hall & Stewart, Boston, Mass., were on brief, for appellant.

James F. Freeley, Jr., Boston, Mass., with whom Robert E. McCarthy and Feeney & Malone, Boston, Mass., were on brief, for appellee.

Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.

COFFIN, Circuit Judge.

In December, 1957, the defendant, Harry Summers, purchased 2000 shares of the stock of General Plywood Corporation through the brokerage house of Harris, Upham in Boston. On December 24, 1957, a stock certificate No. CU-2932 (the original certificate) was issued in the defendant's name. On December 31, 1957, the certificate was mailed from the New York offices of Harris, Upham to the defendant's business address in Boston.

On the morning of January 16, 1958, the defendant executed a proof of loss for the certificate to the plaintiff.¹ There was testimony by the defendant that the certificate was received by him on the afternoon of January 16, 1958. There was also testimony by the defendant that upon receipt of the certificate he notified Harris, Upham as he was obligated to do under the terms of the proof of loss.

On January 27, 1958, the plaintiff issued its indemnity bond. The obligees on the bond were General Plywood, its transfer agent, and its registrar.²

There was evidence in the record to the effect that a replacement certificate was issued by General Plywood. The replacement was never received by the defendant, although he eventually learned of its existence.³

From 1958 until August of 1966 the original certificate was pledged at two Boston banks. In August of 1966 the defendant sold the certificate through the brokerage house of E. F. Hutton & Co. Hutton paid $25,524.23 to defendant's account at City Bank & Trust, but, subsequently, Hutton was unable to obtain transfer of the certificate. Application was made to plaintiff on its bond and plaintiff paid the sum of $25,524.23 to Hutton in consideration of the assignment of Hutton's rights against the defendant to plaintiff.

Plaintiff then brought suit against the defendant in the district court seeking recovery of $25,524.23 on the grounds of breach of contract, fraud, and breaches of the warranties of Mass.Gen.Laws, c. 106, § 8-306. At the close of the evidence the trial court directed a verdict for the defendant on all four counts of plaintiff's complaint.

On this appeal the plaintiff challenges the directed verdict on the grounds that as to counts I and II there was sufficient evidence to present a jury question, and with respect to counts III and IV, the evidence entitled plaintiff to a directed verdict.

Count I — Notification

In count I the plaintiff alleged that the defendant never notified Harris, Upham of his receipt of the original certificate, and that as a result plaintiff was damaged by having to perform on the indemnity bond.⁴

In response to plaintiff's allegation of failure of notification, the defendant testified that he telephoned Mr. Fishburne of Harris, Upham upon receipt of the certificate on the afternoon of January 16, 1958. No attempt was made by plaintiff to call Mr. Fishburne as a witness or to introduce his deposition, or to indicate that Mr. Fishburne was unavailable. Plaintiff recognizes that defendant's testimony is uncontradicted but plaintiff argues that it was entitled to go to the jury because the jury might have disbelieved the defendant.

This court has repeatedly stated that a scintilla of evidence is not enough to warrant submission of an issue to the jury. Cross v. M. C. Carlisle & Co., 368 F.2d 947 (1st Cir. 1966); Magnat Corp. v. B & B Electroplating Co., 358 F.2d 794 (1st Cir. 1966); Rainey v. Gay's Express, Inc., 275 F.2d 450 (1st Cir. 1960). At the same time this court has also said that in determining whether or not a directed verdict is justified, "* * * the evidence must be viewed in the light most favorable to the plaintiff, giving the plaintiff the benefit of every inference favorable to him which may be fairly drawn." Cross v. M. C. Carlisle & Co., supra at 953. But this does not mean that the party having the burden of proof has a right to get to the jury when the only evidence is testimony against him. Dyer v. MacDougall, 201 F.2d 265 (2d Cir. 1949); Davis v. National Mortgagee Co., 349 F.2d 175 (2d Cir. 1965); Mandelbaum v. United States, 251 F.2d 748 (2d Cir. 1958). Moreover, in Janigan v. Taylor, 344 F.2d 781 (1st Cir. 1965), cert. denied, 382 U.S. 879, 86 S.Ct. 163, 15 L.Ed.2d 120, this court held that:

"* * * however satisfied a court may be from the witness\'s demeanor or his demonstrated untruthfulness in other respects that certain testimony is false, it cannot use such disbelief alone to support a finding that the opposite was the fact." 344 F.2d at 784.

If a court as the trier of fact may not use disbelief alone to find that the opposite was fact, a fortiori a party is not entitled to get to the jury on the sole basis that the jury may disbelieve the testimony of his adversary.⁵

Appellant argues that this rule would be too harsh where the only available evidence is the testimony of one's adversary. Dyer v. MacDougall, supra, (concurring opinion by Judge Frank.) But that is not this case. The defendant testified that he called Mr. Fishburne of Harris, Upham, and in view of the fact that this statement could have easily been corroborated or impeached by Mr. Fishburne, it would not seem to be a permissible inference that the defendant was untruthful.

Appellant makes much of the fact that defendant did not notify it and that defendant did not notify anyone in writing of his receipt of the original certificate. The short answer is that defendant had no such obligations.⁶

The plaintiff failed to carry its burden under count I and the trial court correctly directed a verdict for defendant.

Count II — Misrepresentation

The basis of count II of plaintiff's complaint is that plaintiff issued its indemnity bond in reliance on the proof of loss executed by defendant, that the proof of loss was fraudulently executed in that the certificate had been received prior to January 16, 1958, and that plaintiff was damaged as a result of defendant's misrepresentation.

It is first necessary to determine if in fact the certificate was received by the defendant prior to the execution of the proof of loss. The defendant testified that the certificate was received on the afternoon of January 16, 1958, after the proof of loss had been executed. Plaintiff argues that a jury issue was created because under Massachusetts law a showing of the mailing of a properly addressed letter is prima facie evidence of the receipt of the letter in the ordinary course of the mails. See, e. g., Old Colony R. Co. v. Board of Assessors of Quincy, 305 Mass. 509, 26 N.E.2d 313 (1940); Kenney v. Boston Mut. Life Ins. Co., 306 Mass. 282, 28 N.E.2d 490 (1940); Hobart-Farrell Plumbing & Heating Co. v. Klayman, 302 Mass. 508, 19 N.E.2d 805 (1939).

There was uncontradicted evidence that the certificate was properly addressed and posted when mailed first-class on December 31, 1957. However, defendant argues that the Massachusetts decisions cited above are inapplicable because there was no evidence as to the ordinary course of the mails and no indication that the trial judge took judicial notice of this fact. Unfortunately for defendant Massachusetts law requires neither evidence of the ordinary course of the mails nor judicial notice of that fact. Instead, under Massachusetts law, there is a presumption of regularity of the mails. The case of Kenney v. Boston Mut. Life Ins. Co., supra, is instructive on this point. There the issue was whether an application for extended insurance had been filed, at the company's home office in Boston, prior to the death of the insured. The insured died in December of 1935, and there was evidence that the application had been mailed on November 18, 1935, to the company office in Waltham, Massachusetts. The insurance company denied receipt prior to the insured's death, but the court held that a jury could find that the application was received in Waltham and forwarded to Boston prior to the death of the insured. In the present case there would be a presumption that first class mail from New York to Boston required less than 17 days and the defendant's denial of receipt before January 16, 1958, would create a question of fact to be determined by the jury.

If the jury were to find that the original certificate was received prior to the execution of the proof of loss, this would clearly be sufficient to establish fraudulent conduct by the defendant. However, the defendant argues that even if there was a misrepresentation as to receipt of the certificate, there was a cure of fraud before reliance by the plaintiff. The cure is alleged to have occurred by virtue of defendant's notification of Mr. Fishburne of Harris, Upham on January 16, 1958.

This defense presents a rather unusual situation in that it rests upon the same issue — notification of Harris, Upham — which was involved in count I. We hold that a directed verdict was proper under count I because plaintiff had the burden of proof and did not make out a prima facie case. But under count II since cure of fraud is an affirmative defense, the defendant had the burden and we conclude that it was error to direct a verdict in his favor.

We reach this conclusion by...