Deitsch Textiles, Inc. v. New York Property Ins. Underwriting Ass'n

• Citation: 468 N.E.2d 669,479 N.Y.S.2d 487,62 N.Y.2d 999
• Decision Date: 02 July 1984
• Docket Number: No. 1,No. 2,1,2
• Parties: , 468 N.E.2d 669 DEITSCH TEXTILES, INC., Appellant, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION et al., Respondents. (Action) MONEZEL HOLDING CORP., Appellant, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION, Respondent. (Action)
• Court: New York Court of Appeals

Page 487

479 N.Y.S.2d 487

62 N.Y.2d 999, 468 N.E.2d 669

DEITSCH TEXTILES, INC., Appellant, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION et al.,

Respondents. (Action No. 1.)

MONEZEL HOLDING CORP., Appellant, v. NEW YORK PROPERTY INSURANCE UNDERWRITING ASSOCIATION,

Respondent. (Action No. 2.)

Court of Appeals of New York.

July 2, 1984.

Robert J. Miller, New York City, for appellants.

Arthur N. Brook, New York City, for respondents.

OPINION OF THE COURT MEMORANDUM.

The judgment of Supreme Court appealed from and the prior order of the Appellate Division, 93 A.D.2d 853, 461 N.Y.S.2d 353, brought up for review should be reversed, the judgments of Supreme Court dated September 14, 1981 and June 10, 1982 should be reinstated, and the matter remitted to the Appellate Division, Second Department, for consideration of the facts. (See CPLR 5613.)

We agree with plaintiffs that the Appellate Division erred in reinstating the defense of fraudulent proof in both actions.

Two actions were brought against defendant insurance companies after a fire destroyed a Brooklyn commercial building: action No. 1 by tenant Deitsch Textiles, Inc. (Deitsch), for the building's contents; and action No. 2 by owner Monezel Holding Corp. (Monezel) for the structure itself. Both actions were consolidated for trial, at which the affirmative defense of fraudulent exaggeration was dismissed against Deitsch and withdrawn against Monezel. After trial, the jury rendered verdicts of $68,016.18 in favor of Deitsch and $200,000, the stipulated value of the property, in favor of Monezel. In the Deitsch action, the court ordered a new trial as to damages unless defendant stipulated to increase the verdict to $250,000. Defendant refused, and after a second trial, judgment was rendered for Deitsch in the principal sum of $170,000.

The Appellate Division reversed both judgments on the law, reinstated the defense against both plaintiffs, and ordered a new trial. The court determined that factual issues existed with respect to the defense of fraudulent exaggeration in the Deitsch action. Moreover, noting that the principal of both plaintiff corporations was the same individual and deeming the two policies at issue to cover but a single loss, the court held that if the defense were proved as to Deitsch, it would also preclude Monezel from recovering.

The policies at issue contained the standard fraud provision mandated by statute (Insurance Law, § 168, subd. 5), which is breached if an insured tenders a fraudulent proof of loss as the basis for a recovery under the policy. (Saks & Co. v. Continental Ins. Co., 23 N.Y.2d 161, 165, 295 N.Y.S.2d 668, 242 N.E.2d 833.) Specifically, " 'it appears that a plaintiff has willfully and fraudulently placed in the proofs of loss a statement of property lost which he did not possess, or has placed a false and fraudulent value upon the articles which he did own, he is not entitled to recover anything.' " (Id., quoting Domagalski v. Springfield Fire & Mar. Ins. Co., 218 App.Div. 187, 190, 218 N.Y.S. 164.)

Turning first to Deitsch, we find that the record is devoid of proof of this defense. At trial, the insurance companies primarily attempted to discredit, as speculative, two inventories taken by plaintiff of the goods damaged after the fire. However, they tendered no proof of intent to defraud--a necessary element to the defense. (See Jonari Mgt. Corp. v. St. Paul Fire & Mar. Ins. Co., 58 N.Y.2d 408, 417, 461 N.Y.S.2d 760, 448 N.E.2d 427; Sunbright Fashions v. Greater N.Y. Mut. Ins. Co., 34 A.D.2d 235, 310 N.Y.S.2d 760, affd. without opn. 28 N.Y.2d 563, 319 N.Y.S.2d 609, 268 N.E.2d 323.) They also contended that Deitsch never offered invoices substantiating loss of certain equipment into evidence at trial. While this alleged failure may be relevant to whether Deitsch offered sufficient proof of damages, it fails to amount to fraudulent conduct such as would vitiate the policies at issue.

We also assign as error the reinstatement of the fraudulent exaggeration defense as to plaintiff Monezel. CPLR 2104 provides that an oral agreement between parties relating to any matter in an action, if made in open court, is binding. (Cf. Klein v. Mount Sinai Hosp., 61 N.Y.2d 865, 474 N.Y.S.2d 462, 462 N.E.2d...