Aetna Insurance Company v. Barnett Brothers, Inc.

• Decision Date: 01 June 1961
• Docket Number: 16494.,No. 16490,16490
• Citation: 289 F.2d 30
• Parties: AETNA INSURANCE COMPANY et al., Appellants, v. BARNETT BROTHERS, INCORPORATED, Appellee. BARNETT BROTHERS, INCORPORATED, Cross-Appellant, v. AETNA INSURANCE COMPANY et al., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

289 F.2d 30 (1961)

AETNA INSURANCE COMPANY et al., Appellants, v. BARNETT BROTHERS, INCORPORATED, Appellee.

BARNETT BROTHERS, INCORPORATED, Cross-Appellant, v. AETNA INSURANCE COMPANY et al., Appellees.

Nos. 16490, 16494.

United States Court of Appeals Eighth Circuit.

April 19, 1961.

Rehearing Denied June 1, 1961.

Paul W. Steward, Des Moines, Iowa, A. B. Crouch and Patrick D. Kelly, Des Moines, Iowa, on the brief, for Barnett Brothers, Inc.

Samuel Levin, Chicago, Ill., and Ronald M. Glink, Chicago, Ill., and Joseph I. Brody and Charles E. Harris, Des Moines, Iowa, on the brief, for Aetna Ins. Co. et al.

Before WOODROUGH, VAN OOSTERHOUT and MATTHES, Circuit Judges.

WOODROUGH, Circuit Judge.

This action was for recovery of the amount of loss by fire upon twelve fire insurance policies issued to the plaintiff, insuring its stock of furniture located in a warehouse building on Third street in Des Moines, Iowa, which burned together with its contents on May 18, 1958. There was diversity of citizenship and federal jurisdiction. The affirmative defenses pleaded by the insurance companies were arson and misrepresentation, fraud and false swearing attributable to plaintiff concerning the arson and the amount of the loss. The jury found against defendants and in answer to a special interrogatory found that the fire involved was not an arson fire. The verdict was for $65,460.06, being the amount computed by the accountants called by the defendants, which was considerably less than the amount computed by the plaintiff's accountant. The defendants appeal and contend for reversal in substance:

1. That the verdict for the plaintiff on the issues of (a) arson and (b) misrepresentation, fraud and false swearing was contrary to all the evidence, which appellants argue established the defenses as a matter of law.

2. That the Court erred in excluding evidence proffered by defendants that the witness Ben Leventhal refused to take a lie detector test.

3. That the Court erred in failing to declare a mistrial.

4. That the Court erred in limiting appellants in their argument to the jury.

Plaintiff, Barnett Brothers Incorporated, has cross-appealed and contends that the Court erred in denying its motion to add interest to the amount of the verdict either from a date sixty days after proof of loss or from the date of filing the complaint or from the dates when answers were filed or from such other date as the Court shall deem proper.

The policies contain provision that the company shall not be liable for loss by fire caused directly or indirectly by neglect of the insured to use all reasonable means to save and preserve the property at and after loss and the defense of arson was raised under this provision. The policies also contain provisions which void the insurance "* * * if, whether before or after a loss, the insured has wilfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, * * * or in case of any fraud or false swearing by the insured relating thereto." The arson defense was also asserted in a charge that the officer of plaintiff corporation, Louis Barnett, falsely stated and swore that he did not know the cause of the fire when in truth he had knowledge of the cause.

The evidence relating to the charge of arson is voluminous and has been carefully examined. It is entirely circumstantial as no witness testified to any act of incendiarism. No material was found of such character or so placed that any one claims it may have been used to start the fire.

The sole owner of the corporate capital stock of the plaintiff corporation is Virginia Barnett, a tiny lady sixty one years old as to whom counsel for defendants said to the jury in closing argument, "this lady wasn't involved in this, I mean the planning of this fire." No other person was shown to have had any financial interest in the property or in burning it. The presumption against criminal arson was also buttressed by proof that men working in the warehouse in the afternoon before the fire were smoking cigarettes. The electrical system was knocked out and fuses were blown or broken because of shorts in the wiring and the building was filled with material that was highly combustible. Defendants adduced the testimony of experts and persons who examined the ruins after the fire who expressed their opinion that the fire was the result of two or more fires started at or near the same time in different parts of the building, which in their opinion indicated origin by arson. Descriptive photographs and explanations were made at length in support of the claim of simultaneous fires at different places. The expert witnesses sought to define the course that the fire took throughout the building from the traces left in the ruins. But the traces of fire were uneven, heavy in some places and much less charring in others. Though the building was divided by a fire wall, there were openings in it which together with the elevator shaft and holes burned through the ceiling and floors provided means of travel for the fire on each floor and from one floor to the other. All the openings showed plain marks of the passage of the fire through them.

As to misrepresentation, fraud, and false swearing concerning the loss, the jury found the amount of the fire loss to the stock of goods to be $69,390.51 from which $3,930.45 was deducted on account of salvage. In view of the instructions given to the jury the purport of its findings was that the plaintiff's claim for $105,228.59 was an over valuation of some $36,000.00, but that it was not knowingly false or fraudulent.

The evidence is that the proof of loss was prepared by Mr. Freedman, the agent of the defendant insurance companies who had written the insurance, and the amounts were taken from figures supplied by the certified public accountant, Mr. Sauerman, who is in the supervisory group in the management end of a nationally known accounting firm that had done the accounting work for plaintiff for a number of years. Plaintiff kept a complete set of books and their own bookkeeper, but the accountants had done the posting in the year in question. There was no current physical inventory so that it was necessary to compute the loss from the books and records. An important step in the computation was to determine and apply the proper percentage to use in reducing the sales to a cost of sales basis. The accountant employed by the insurance companies and the accountant employed by the plaintiff, after extensive and laborious investigation and computing, compared their results and there was no important disagreement between them except that Mr. Augustine for the insurance companies used the figure of 65 per cent in computing the cost of sales and Mr. Sauerman for the plaintiff arrived at a figure of 50 per cent for that purpose. Mr. Sauerman justified the use of the 50 per cent figure in his testimony because he had found through conferences and spot checks at the store, "historical data" that was not taken into consideration by Mr. Augustine. Mr. Sauerman swore "I definitely feel that's a fair percentage. Q. What percentage? A. Fifty per cent."

The instructions to the jury accordingly forbade recovery if the 50 per cent figure was false and plaintiff's officer knew it to be false, and they sanctioned recovery for plaintiff only if the officer in signing the proof of loss made the statements in good faith and with an honest belief that the value, loss or damage and the cost of sales were as he stated, and if he did not intend thereby to mislead or defraud the defendants, then such values, loss or damage or cost of sales would not be such a fraudulent misrepresentation or concealment as would prevent plaintiff from recovering in this action even though the proof of loss stated a cash value or damage in excess of the actual value, loss or damage, or stated a cost of sales less than the actual cost of sales.

The defendants in this case did not move for a directed verdict at the close of the evidence on the trial nor did they request instructions that any of their defenses had been established as a matter of law. On the contrary, they specifically requested a submission of the fact issues to the jury and took no exception to the instructions upon which the case was submitted to the jury. After the verdict had been returned they attempted to raise the question of the insufficiency of the evidence by motion, but the law is firmly settled that upon such a record no law question as to the sufficiency of the evidence to support the verdict of the jury is presented for review by this Court. We have made our examination of the evidence only to be assured that no injustice has been done. But we hold that no law question for review by this Court has been presented as to the sufficiency of the evidence to support the verdict of the jury covering the defenses of arson, misrepresentation, fraud or false swearing or as to the amount of the verdict. Myra Foundation v. United States, 8 Cir., 1959, 267 F.2d 612; United States v. City of Jacksonville, Arkansas, 8 Cir., 1958, 257 F.2d 330; Godwin v. Brown, 8 Cir., 1957, 249 F.2d 356; Een v. Consolidated Freightways, 8 Cir., 1955, 220 F.2d 82; O'Malley v. Cover, 8 Cir., 1955, 221 F.2d 156.

2. The witness Ben Leventhal is a nephew of Virginia Barnett and Louis Barnett and employed in the plaintiff's furniture business as a sales manager. He testified as a witness for plaintiff, his testimony being limited to his participation in the taking and pricing of inventories. Later he was called by defendants and examined under Rule 43(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A. He testified in answer to questions that he had been down to the warehouse and tried the door during the evening preceding the fire and that he had a week or more before the fire requested Vilma Nesset, an errand girl in the store, to go out and purchase some...