Almonte v. National Union Fire Ins. Co., 85-1187

• Decision Date: 05 May 1986
• Docket Number: No. 85-1187,85-1187
• Citation: 787 F.2d 763
• Parties: 20 Fed. R. Evid. Serv. 882 Grace M. ALMONTE, et al., Plaintiffs, Appellants, v. NATIONAL UNION FIRE INSURANCE COMPANY, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 763

787 F.2d 763

20 Fed. R. Evid. Serv. 882

Grace M. ALMONTE, et al., Plaintiffs, Appellants, v. NATIONAL UNION FIRE INSURANCE COMPANY, Defendant, Appellee.

No. 85-1187.

United States Court of Appeals First Circuit.

Argued Jan. 8, 1986.

Decided April 2, 1986.

Rehearing Denied May 5, 1986.

Edward L. Gerstein with whom Sharon O'Keefe, Providence, R.I., was on brief, for plaintiffs, appellants.

Raymond A. LaFazia with whom Netti C. Vogel and Gunning, LaFazia & Gnys, Inc., Providence, R.I., were on brief, for defendant, appellee.

Before COFFIN, Circuit Judge, ROSENN, ^* Senior Circuit Judge, and BOWNES, Circuit Judge.

BOWNES, Circuit Judge.

Plaintiff, Grace Almonte, appeals from a district court order entering judgment for defendant, National Union Fire Insurance Company, in an action brought by plaintiff to recover for losses caused by fire and vandalism at an ice cream manufacturing plant in Providence, Rhode Island. ¹ Plaintiff contends that the district court erred in: (a) failing to give the jury a clear instruction on the legal definition of ownership; (b) admitting inadmissible hearsay statements as the basis of an expert opinion; and (c) denying plaintiff's motion for a new trial. The circumstances underlying plaintiff's suit are as follows.

The ice cream plant involved in this case was originally owned by plaintiff's father-in-law, Angelo Almonte (Angelo), as part of a family-run ice cream business, Federal Ice Cream. Angelo retired from the business in 1972 and transferred all his stock in Federal Ice Cream to his son Anthony Almonte (Anthony), plaintiff's husband. Angelo retained ownership of the plant, however, in the name of Santino Realty, a real estate company owned by him. He also held a chattel mortgage on Federal Ice Cream's equipment.

Once in control of the business, Anthony started to expand Federal Ice Cream. He bought plants and distributing companies in Massachusetts and Connecticut and plaintiff helped him by contributing to these purchases out of her personal funds. Unfortunately, Anthony's plans soon went awry. Federal Ice Cream ran into severe financial difficulties. In 1974, it was petitioned into receivership and it remained in that status for about a year and a half, when Angelo came to the rescue and bought it out.

The Providence plant remained open throughout the period of the receivership. Though Federal Ice Cream did not manufacture ice cream during that time, it continued to sell ice cream from stock purchased from other manufacturers. For three years following the receivership the Providence plant was operated as Genico, Inc., by Gino Faiola, a former employee of Federal Ice Cream. Faiola did not manufacture ice cream either but merely sold ice cream to Federal Ice Cream customers.

In early 1977, Anthony and Gino Faiola decided to get back into the ice cream manufacturing business with a new corporation, Fairway Foods. They agreed to close down the Providence plant so that it could be refurbished and they concluded a tentative agreement with Ernest Antollino, principal of an ice cream distributorship, Consolidated Ice Cream, for the distribution of Fairway Foods' product. It was also agreed that the ice cream would be marketed under the Federal Ice Cream label. Anthony proceeded to make major improvements to the plant. He had all the machinery repaired and additional equipment shipped in from Federal Ice Cream's then defunct Massachusetts plant. He also had much of the plant repainted. Plaintiff again contributed to his plans, providing $50,000 towards the cost of these improvements, which was raised by taking out a mortgage on a residential property she had inherited from an aunt.

When most of the improvements were complete, Anthony and plaintiff contacted Don Caldwell, an insurance broker who had serviced the needs of Federal Ice Cream for several years, about insuring the plant. Though neither Anthony nor plaintiff had legal title to the plant at the time, plaintiff testified that she wanted the plant insured because she knew that Angelo, the owner of the plant, intended to transfer it to her. With Anthony's help, plaintiff chose a low budget one year premium insurance policy which covered the plant's manufacturing building and contents against fire and vandalism for $550,000 and the attached office building and contents for $70,000. Anthony arranged financing to pay the $9,965 premium. The policy was issued on July 1, 1977, and plaintiff, Fairway Foods and Consolidated Ice Cream were named as insureds.

Later that year, in October 1977, Angelo did in fact transfer title to the plant and its equipment to plaintiff. Angelo had considerable personal wealth and this transfer was made in the course of a general disposition amongst his seven children of certain assets, totalling approximately $1,000,000 in value. Angelo testified that he had wanted to give the plant to Anthony free of charge but that Anthony had persuaded him to put it in plaintiff's name instead as security for the money plaintiff contributed to Anthony's business. According to Angelo, Anthony also suggested that Angelo put fixed prices on the various items of personal property. Anthony's brother, an attorney in Rhode Island, was enlisted to draw up formal bills of sale. Plaintiff gave Angelo two promissory notes for the property and Angelo retained a $28,000 chattel mortgage on the equipment and a $47,000 mortgage on the plant buildings. The deed transferring the plant to plaintiff was recorded on October 12, 1977. Plaintiff then allegedly entered into agreements with Anthony and Faiola, as owners of Fairway Foods, and Ernest Antollino, owner of Consolidated Ice Cream, for the lease of the plant.

The events triggering the instant suit began on October 25, 1977, just a few days after the property had been transferred to plaintiff. Anthony reported to the police that the plant had been vandalized. On investigation the police found that extensive damage had been done, particularly to the machinery, and that the plant had been rendered completely inoperative. When Anthony reported the incident to the insurance broker, Caldwell told him that the bulk of the loss was not covered because the policy did not cover vandalism to the contents of the plant as distinct from vandalism to the buildings. Five days later, there was a fire at the plant totally destroying the buildings and most of the equipment.

Police and fire officers who went to the scene of the fire concluded that it had been deliberately set and the matter was turned over to the Police Department for further investigation. Plaintiff hired a public adjuster to appraise the damage and defendant also sent several agents out to the razed plant to make an appraisal. When plaintiff submitted her proofs of loss for both the vandalism and the fire, defendant refused to pay on either claim. Plaintiff then filed suit.

Defendant relied on two clauses in the insurance policy: one providing that the policy would be void if the insured "wilfully concealed or misrepresented any material fact or circumstance" concerning the insurance or the interest of the insured therein or in case of any fraud by the insured relating thereto; and the other providing that defendant would not be liable for loss occurring as a result of a hazard increased by any means within the knowledge and control of the insured. Defendant contended that plaintiff was not the owner of the insured property, that the plant actually belonged to Anthony, and that the policy was, therefore, void. Defendant claimed further that Anthony was responsible for the losses and that the losses were fraudulent and within the 'increased hazard' bar of the policy. In support of its position, defendant urged that plaintiff's name on the title deed and other documents was not conclusive and that the entire set of circumstances surrounding the transfer of the plant had to be taken into account in deciding who owned the plant.

The defendant elicited evidence at trial to add force to its claim that Anthony owned the plant. In addition to showing that the promissory notes were Anthony's idea, defendant also established that Angelo had not received, and did not expect to receive, any payment from plaintiff on those notes. This reinforced defendant's contention that the transaction was a sham. Defendant also relied on the fact that Anthony applied for the insurance with plaintiff and arranged the financing for it and on the degree of control he exercised over the plant as evidence of Anthony's proprietary interest. Plaintiff's own testimony strengthened defendant's case for she displayed little or no knowledge of the nature and extent of the equipment in the plant that she alleged she had leased to Anthony. Nor could she verify whether she had signed the lease agreements as alleged and the agreements themselves could not be found.

Defendant relied primarily on circumstantial evidence to link Anthony to the acts of vandalism and the fire. It showed that Grace and Anthony were in severe financial straits prior to October 1977 and that their joint tax return for the preceding three years indicated an income of less than $3,000 per annum. Defendant suggested that the decision to take out a policy costing over nine thousand dollars in premiums was cause for suspicion in light of this impecunity, particularly when the plant had not been insured for the preceding three and one-half years. That same impecunity, defendant contended, supplied ample motive for fraud.

Defendant also urged that a connection between Anthony and the vandalism could be inferred from the testimony of one of the investigating police officers, Urbano Prignano, that he thought the vandalism had been done over a period of time by someone who knew what he or she was doing. Robert Tompkins, one of plaintiff's appraisers, also testified that the vandalism was unusually destructive. All valves, gauges, switches, et cetera, had been forcibly...