Cerro Gordo Charity v. Fireman's Fund American Life Ins. Co., Nos. 86-5002

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtBefore WOLLMAN and MAGILL; WOLLMAN
Citation819 F.2d 1471
Parties23 Fed. R. Evid. Serv. 530 CERRO GORDO CHARITY, an Iowa non-profit corporation and Attorney General of the State of Minnesota, v. FIREMAN'S FUND AMERICAN LIFE INSURANCE COMPANY, a California insurance corporation, Appellee, and American National Bank & Trust Co., personal representative of the Estate of May V. Wilson. Appeal of Leonard J. RICHARDS (non-party). CERRO GORDO CHARITY, an Iowa non-profit corporation and Attorney General of the State of Minnesota, v. NORTH AMERICAN LIFE AND CASUALTY COMPANY, Appellee, and American National Bank & Trust Co., personal representative of the Estate of May V. Wilson. Appeal of Leonard J. RICHARDS (non-party).
Decision Date29 May 1987
Docket NumberNos. 86-5002,86-5003

Page 1471

819 F.2d 1471
23 Fed. R. Evid. Serv. 530
CERRO GORDO CHARITY, an Iowa non-profit corporation and
Attorney General of the State of Minnesota,
v.
FIREMAN'S FUND AMERICAN LIFE INSURANCE COMPANY, a California
insurance corporation, Appellee,
and American National Bank & Trust Co., personal
representative of the Estate of May V. Wilson.
Appeal of Leonard J. RICHARDS (non-party).
CERRO GORDO CHARITY, an Iowa non-profit corporation and
Attorney General of the State of Minnesota,
v.
NORTH AMERICAN LIFE AND CASUALTY COMPANY, Appellee,
and American National Bank & Trust Co., personal
representative of the Estate of May V. Wilson.
Appeal of Leonard J. RICHARDS (non-party).
Nos. 86-5002, 86-5003.
United States Court of Appeals,
Eighth Circuit.
Submitted Dec. 10, 1986.
Decided May 29, 1987.

Page 1473

Richard G. Mark, St. Paul, Minn., for Cerro Gordo Charity.

F. Patrick McGrath, St. Paul, Minn., for Leonard J. Richards--non-party.

Steven Jamar, Minneapolis, Minn., for Fireman's Fund.

Robert S. Cragg, Minneapolis, Minn., for North American Life & Cas. Co.

Page 1474

Before WOLLMAN and MAGILL, Circuit Judges, and HANSEN, * District judge.

WOLLMAN, Circuit Judge.

May Wilson was found dead in the basement of a north Minneapolis storefront on May 21, 1982. Thereafter, Cerro Gordo Charity, a beneficiary of several accidental death and dismemberment insurance policies on Ms. Wilson's life, brought separate actions against North American Life and Casualty Company (North American) and Fireman's Fund American Life Insurance Company (Fireman's Fund) to collect $450,000 in proceeds.

The insurers denied payment, alleging that the policies were void ab initio because they were obtained as a result of a fraudulent scheme by May Wilson's half-brother, Leonard Richards, to have his sister murdered in order to collect the insurance proceeds. Based upon the verdict of the jury, the district court 1 dismissed Cerro Gordo's claims against the defendants. Cerro Gordo now appeals.

I

Reduced to its most basic form, this case is relatively simple. It involves May Wilson; her half-brother, Leonard Richards; an Iowa Charity, Cerro Gordo; and three insurance policies. The fundamental question presented is whether Richards killed, or caused to have killed, his half-sister with the intent to recover the insurance proceeds and defraud the insurance companies. As will be seen, however, this simplicity is quickly lost in a maze of trust funds, insurance policies, psychiatrists, alumni associations, churches, corporations, unusual occurrences, and, of course, the usual sprinkling of legal questions. At times this intriguing factual scenario seems to be based on some murder mystery or television detective drama. For all the gambits, legal and otherwise, that this case has produced, however, overshadowing all is the stark reality of the murder that the jury found had been committed and the motive that resulted in May Wilson's death. 2

A

May Wilson was born on May 12, 1926. After graduating from high school in 1944, she earned a nursing degree from Cleveland City Hospital School of Nursing and a bachelor's degree in biological science and education from Ohio State University. She later received a master's degree in nursing administration from the University of Minnesota. In 1962, she joined the Air Force as a captain. Her initial responsibilities were as a coordinator of educational programs for nurses. She was later promoted to major and was responsible for in-flight training and education of nurses. In 1965, she became assistant chief nurse at Clark Air Force Base Hospital in the Philippines. Despite her successful career in the Air Force, however, Wilson had to leave military service in 1968 as a result of medical problems. She was honorably discharged and placed on total disability status.

Following her return to civilian status, Wilson's life took a turn for the worse. From 1968 until her death in 1982, she was hospitalized many times for both physical and mental ailments. There is evidence of a number of suicide attempts or threats of suicide. During this period, she was treated by a dozen or more psychiatrists, with frequent long-term hospitalizations of a psychiatric nature. She constantly took a number of drugs to relieve her anxiety and depression and to help her sleep. As a part of her treatment she received electro-shock therapy on a number of occasions. Her

Page 1475

diagnoses included depressive psychosis, cyclical depression, severe anxiety, hysterical personality disorder, and drug dependency. Although there is testimony in the record characterizing Wilson as a demanding, strong-willed, and competent person, there is also evidence that at times she was incapable of performing even simple tasks because of her mental condition.
B

The other key figure in this case is Leonard Richards, Wilson's half-brother. Richards was ordained a minister by his mother and has incorporated a number of churches. Though he refused to testify at trial, Richards did indicate that he is currently a "management consultant." His activities have been conducted through many corporations and other entities bearing his home address or that of a small storefront office. The role that Richards played in Wilson's life will come into greater focus as we elaborate on the events leading up to this litigation.

C

From 1975 through 1979, Wilson was insured by as many as 46 policies of hospital income protection (HIP) insurance. HIP plans are designed to pay a certain amount of money for each day a person is hospitalized, regardless of the costs of the medical care or the existence of medical insurance. Wilson obtained this insurance through membership in a large and diverse group of organizations ranging from the National Rifle Association to the American Waterworks Association. According to a conservatorship accounting in 1978, Wilson belonged to some 80 different organizations, including some 50 alumni associations.

Wilson was frequently hospitalized in Mexico and Costa Rica during the winter months. Claims were handled by Richards and two attorneys. Upwards of $700,000 was collected from the insurance companies under these policies. The proceeds, however, did not go directly to Wilson but instead went into certain trusts controlled by Richards.

After the insurance companies began contesting payment under the HIP policies, there was a build-up of accidental death and dismemberment (AD & D) insurance. About the time the policies were being procured, Richards created a number of trusts, both charitable and otherwise. These trusts were designated as beneficiaries of the policies. One of these charitable trusts is the appellant in this case, Cerro Gordo Charity (Cerro Gordo). Wilson's will was also drawn up during this time, naming some of the trusts as beneficiaries. At the time of Wilson's death, AD & D insurance in excess of $3.5 million had been taken out on her life.

D

Cerro Gordo is an Iowa non-profit corporation, organized in 1978 and registered as a charity with the Minnesota Attorney General. It has been granted tax-exempt status by the Internal Revenue Service. Cerro Gordo was funded with some of the proceeds from HIP settlements with the insurance companies. Leonard Richards, May Wilson, and Sanni Richards (the mother of Leonard and May) were the initial voting members and directors of Cerro Gordo. Cerro Gordo's articles of incorporation contained an anti-deadlock provision in effect while Richards was a voting member that gave him full control. By February 1982, Richards was the only voting member of Cerro Gordo. He then elected James Reichert, an attorney, as a voting member; the two were the sole voting members of the charity at the time of Wilson's death. 3 Prior to Wilson's death, the only charitable activity of Cerro Gordo was a grant to the Wilson Lectures in American Penology, a tax-exempt, non-profit corporation controlled by Richards. The funds

Page 1476

were used to pay a college professor for a paper and a speech.
E

On May 21, 1982, Wilson was found dead in the locked basement of a north Minneapolis storefront leased by one of Richards' corporations, Administration Center, Inc. Her body was found partially clothed beneath a pile of flattened boxes in the basement. There were two stab-like wounds to her neck. According to the medical examiner, Wilson had been dead for at least five or six days, but probably not more than fourteen days, by the time her body was discovered. Two unopened condoms were found near the body, and a key was found in the victim's vagina. There were no defense wounds on the body, and Wilson's clothing was not torn. The upstairs windows had been covered with opaque wax paper. Wardrobe boxes containing women's clothing were found in the upstairs area; some items had labels bearing Wilson's name. Various blood stains were found, indicating that the body had been upstairs at one time. The medical examiner testified that the body had been moved following death and that it was possible that the scene had been altered to make it look like a sexual assault. No murder weapon or fingerprints were found.

Following Wilson's death, Cerro Gordo, as beneficiary, brought separate actions against North American and Fireman's Fund to collect on three AD & D policies issued by the companies on Wilson's life. The cases were consolidated for trial.

The insurance companies contended at trial that they should not be required to honor the policies because Richards had murdered Wilson as part of a fraudulent scheme to obtain the insurance proceeds. As an affirmative defense to the payment of the insurance proceeds, the insurance companies had the burden of establishing: (1) that Wilson did not have an independent motivation to procure the insurance and did not acquire the insurance with the intent to insure her life, but instead served as a mere instrumentality through which Richards obtained the insurance; (2) that...

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    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
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    ...to testify as vicarious admissions of their former employer."); see also Cerro Gordo Charity v. Fireman's Fund American Life Ins. Co., 819 F.2d 1471, 1481 -1482 (8th Cir. 1987) (affirming jury verdict in which non-party, non-member of plaintiff charitable trust was called to the stand solel......
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    ..."[e]vidence is to be considered in the light most favorable to the verdict," Cerro Gordo Charity v. Fireman's Fund Am. Life Ins. Co., 819 F.2d 1471, 1485 (8th Cir.1987), and that we may overturn the jury's verdict only if "the evidence is susceptible to no reasonable inferences sustaining i......
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    ...RAD Services, Inc. v. Aetna Casualty and Surety Co., 808 F.2d 271 (3d Cir.1986); Cerro Gordo Charity v. Fireman's Fund Life Insurance, 819 F.2d 1471 (8th Cir.1987); United States v. District Council of New York City and Vicinity, 832 F.Supp. 644, 652 (S.D.N.Y. 1993); Aetna Casualty & Surety......
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    ...In re New England Marine Servs., Inc., 174 B.R. 391, 397 (Bkrtcy.E.D.N.Y.1994)); Cerro Gordo Charity v. Fireman's Fund Am. Life Ins. Co., 819 F.2d 1471, 1486 (8th Cir.1987) (holding that a contract that is not automatically renewable is not continuous). The Board found Caterpillar Fin. Serv......
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48 cases
  • United States v. Its Fin., LLC, Case No. 3:12-cv-95
    • United States
    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
    • November 6, 2013
    ...to testify as vicarious admissions of their former employer."); see also Cerro Gordo Charity v. Fireman's Fund American Life Ins. Co., 819 F.2d 1471, 1481 -1482 (8th Cir. 1987) (affirming jury verdict in which non-party, non-member of plaintiff charitable trust was called to the stand solel......
  • John Morrell & Co. v. Local Union 304A of United Food and Commercial Workers, AFL-CIO, AFL-CIO
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • September 7, 1990
    ..."[e]vidence is to be considered in the light most favorable to the verdict," Cerro Gordo Charity v. Fireman's Fund Am. Life Ins. Co., 819 F.2d 1471, 1485 (8th Cir.1987), and that we may overturn the jury's verdict only if "the evidence is susceptible to no reasonable inferences sustaining i......
  • Orena v. U.S., No. 96 CV 1474.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 10, 1997
    ...RAD Services, Inc. v. Aetna Casualty and Surety Co., 808 F.2d 271 (3d Cir.1986); Cerro Gordo Charity v. Fireman's Fund Life Insurance, 819 F.2d 1471 (8th Cir.1987); United States v. District Council of New York City and Vicinity, 832 F.Supp. 644, 652 (S.D.N.Y. 1993); Aetna Casualty & Surety......
  • Ace Property & Cas. Ins. Federal Crop Ins., Civil Action No. 06-1430 (RMU).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 28, 2007
    ...In re New England Marine Servs., Inc., 174 B.R. 391, 397 (Bkrtcy.E.D.N.Y.1994)); Cerro Gordo Charity v. Fireman's Fund Am. Life Ins. Co., 819 F.2d 1471, 1486 (8th Cir.1987) (holding that a contract that is not automatically renewable is not continuous). The Board found Caterpillar Fin. Serv......
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