Gonzalez-Marin v. Equitable Life Assur. Soc. of U.S.

• Decision Date: 09 March 1988
• Docket Number: P,GONZALEZ-MARI,No. 87-1877,87-1877
• Citation: 845 F.2d 1140
• Parties: Neftalilaintiff, Appellee, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1140

845 F.2d 1140

11 Fed.R.Serv.3d 308

Neftali GONZALEZ-MARIN, Plaintiff, Appellee, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES,

Defendant, Appellant.

No. 87-1877.

United States Court of Appeals, First Circuit.

Heard March 9, 1988.

Decided May 6, 1988.

Joseph Williams, Jr., with whom Edward M. Borges, Jorge I. Peirats and O'Neill & Borges, Hato Rey, P.R., were on brief for defendant, appellant.

Luis R. Mellado-Gonzalez with whom Lorna Rodriguez-Marquez and Mellado & Mellado, Hato Rey, P.R., were on brief for plaintiff, appellee.

Before COFFIN, BOWNES and SELYA, Circuit Judges.

BOWNES, Circuit Judge.

Defendant-appellant, the Equitable Life Assurance Society of the United States (Equitable), contests a jury verdict ordering both the specific performance of a disability income policy and the payment of moral damages to Neftali Gonzalez Marin, the purchaser and beneficiary of the disputed policy. Gonzalez became disabled by catatonic schizophrenia ¹ within three months after purchasing the insurance policy. He therefore filed a claim for benefits with Equitable. Although Equitable found Gonzalez disabled within the meaning of the policy, it withheld benefits and sent Gonzalez a notice of rescission. Its reason was that the insured ostensibly had misrepresented his predisability income in his application for insurance and that therefore the policy was unenforceable. Suit was filed on behalf of Gonzalez for reinstatement, back pay benefits and moral damages. ² On appeal, Equitable alleges numerous errors which raise four distinct issues: (1) the sufficiency of the evidence, (2) the possibility of prejudice resulting from the presence of Gonzalez in the courtroom, (3) the propriety of the closing argument by Gonzalez's counsel, and (4) the amount of the verdict.

I. FACTUAL BACKGROUND

The events leading to the present suit date to July 1981 when Efrain Berrios, a disability insurance salesperson for Equitable, entered the Plaza del Este Cash & Carry in Humacao, Puerto Rico, in search of new clients. Upon requesting to see the manager of the store, Berrios met Neftali Gonzalez Marin. According to the testimony of Berrios, Gonzalez expressed an interest in purchasing disability insurance and agreed to meet with Berrios after working hours.

A few days later, Berrios arrived at the home of Gonzalez to discuss various disability income plans. The nature of their interchange is crucial to the question of misrepresentation. The only evidence concerning the parties' conversation is the testimony of Berrios and Equitable's response to various requests for admission. No person other than Gonzalez and Berrios was present during the conversation, and Gonzalez's illness rendered him incapable of testifying at trial.

Berrios testified that he described two different policies to Gonzalez: one provided benefits of $2,500 per month and the other provided benefits of $3,000 per month. Gonzalez chose the latter option. That plan ensured income during the course of a disability due to illness until the age of sixty-five. The package Gonzalez purchased also included hospitalization benefits.

After helping Gonzalez select a plan, Berrios produced a three-page application form. Gonzalez did not fill out the form; instead, Berrios asked the applicant various questions orally and noted the answers upon the form himself. Berrios testified that he paraphrased some of the questions on the form and that he did not ask others.

The treatment of questions regarding the applicant's income are at the core of the controversy. In paragraph three on the first page of the application form, the following questions appear:

Earnings

a. What is your earned annual income?

(Indicate your present yearly salaries, fees and other earned income. If you work on your own, or if you are a member of any partnership, indicate your gross earnings, deducting your current operational expenses disbursed in order to get these earnings).

b. Will you continue to receive any portion of such income during disability?

c. Has your yearly income changed over twenty percent within the last two years?

On the application form, Berrios entered the figure $100,000 in response to part (a) of the question, and he entered "no" in response to parts (b) and (c). Berrios testified that earlier in the interview, when he described the various plans available for disability income, he explained that an applicant must have an annual income greater than or equal to ninety thousand dollars to qualify for the insurance package chosen by Gonzalez. Berrios testified: "I verbally asked him whether he earned that amount of money and he said to me, yes, I earn that amount and more." Berrios did not request any documents confirming that assertion.

After completing the oral inquiry, Berrios handed the application to Gonzalez. Gonzalez signed pages two and three of the form; he did not sign page one--the page upon which the income related questions appeared. Gonzalez then paid his first premium and Berrios departed, taking the sole copy of the application form along with him. Gonzalez did not receive a copy of the application until Equitable issued and delivered the disability income policy on August 28, 1981.

Gonzalez had no further substantive exchange with Equitable until May 9, 1982, when he filed a claim for disability income under both the policy in question and a preexisting policy held by him which provided benefits of $400 per month. The claim for benefits followed the onset of Gonzalez's illness by several months. According to the testimony of his wife, Mirtha Soto, Gonzalez began to demonstrate signs of mental illness in November 1981. In January 1982, Gonzalez sought psychiatric treatment with Dr. Jose Vigoreaux. Dr. Vigoreaux previously had treated Gonzalez from February 1967 until October 1968 for "emotionally unstable and inmature [sic] personality." Due to the permanent disability of Vigoreaux which followed a stroke in 1978, Gonzalez was referred to and began treatment with Dr. Guillermo Hoyos.

Equitable has never contested that Gonzalez is disabled within the meaning of both disability income policies. On May 29, 1982, Equitable began payments to Gonzalez under the $400 per month policy, but withheld all benefits under the disputed policy. On January 11, 1983, Equitable sent Gonzalez a "notice of rescission" on the grounds of insufficient earnings to qualify for coverage, stating that Gonzalez had never earned more than $30,000 in the three years relevant to the policy. Equitable enclosed, with the notice of rescission, a check refunding all of the premiums paid by Gonzalez. On the advice of counsel, Gonzalez refused the refund.

Suit was filed in the Superior Court of Puerto Rico. Upon Equitable's petition, the case was removed to federal court. On July 9, 1986, the district court issued an opinion and order in response to a joint motion for pretrial determination of two issues of law. The first issue, and the only one relevant to this appeal, involved the interpretation of Article 11.100 of the Insurance Code of Puerto Rico, 26 L.P.R.A. Sec. 1110 (1976), which addresses the effect of misrepresentations in an application for an insurance policy. ³ The court held that the alleged misrepresentation in the case at bar implicated paragraph (3) of the statute: "The insurer in good faith ... would not have issued a policy in as large an amount ... if the true facts had been made known to the insurer." The court further found that the nexus requirement of the statute, which provides that a misrepresentation will bar recovery only if "such actions or omissions contributed to the loss that gave rise to the action," was met under the facts of the case. The only issue remaining for trial, therefore, was whether or not Gonzalez misrepresented his income on the application for insurance. If he did, then Equitable lawfully rescinded the policy. If he did not, then the statute provided no grounds for rescission and Equitable would be held liable under the policy. ⁴

After a five-day trial, the jury rendered a verdict for Gonzalez. It found Equitable liable for reinstatement and back pay benefits under the disability income policy. The jury further found Equitable liable for moral damages in the amount of $800,000 less the amount of $216,000 for failure to mitigate such damages. The award for moral damages was therefore $584,000. On July 16, 1987, the court denied appellant's motions for a new trial and for judgment notwithstanding the verdict. The court found that Gonzalez "had not subjectively or intentionally intended to deceive or defraud the defendant." It therefore ordered that Equitable pay Gonzalez past benefits owed under the policy in the amount of $210,356.64 plus interest. This appeal ensued.

II. SUFFICIENCY OF THE EVIDENCE

Equitable asserts that uncontradicted evidence introduced at trial demonstrates that Gonzalez failed to earn the minimum income required under the policy in question. It argues that insufficient evidence exists to support the jury award in favor of Gonzalez and that the district court erroneously denied its motions for a directed verdict, judgment notwithstanding the verdict, or in the alternative, a new trial. We disagree.

First we note the standards of review applicable to this case. Appellate review of the denial of a motion for a directed verdict or for a judgment n.o.v. is limited: " 'we must examine the evidence in the light most favorable to the plaintiff and determine whether there are facts and inferences reasonably drawn from those facts which lead to but one conclusion--that there is a total failure of evidence to prove plaintiff's case.' " Mayo v. Schooner Capital Corp., 825 F.2d 566, 568 (1st Cir.1987) (quoting Fact Concerts, Inc. v. City of Newport, 626 F.2d 1060, 1064 (1st Cir.1980), vacated on other grounds, 453 U.S. 247, 101 S.Ct. 2748, 69 L.Ed.2d 616 (1981)). Review of the denial of a motion for a new...