Farace v. Independent Fire Ins. Co., 82-3236

• Decision Date: 14 February 1983
• Docket Number: No. 82-3236,82-3236
• Citation: 699 F.2d 204
• Parties: 12 Fed. R. Evid. Serv. 1043 Joseph A. FARACE and Vita Farace, Plaintiffs-Appellees Cross-Appellants, v. INDEPENDENT FIRE INSURANCE COMPANY, Defendant-Appellant Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 204

699 F.2d 204

12 Fed. R. Evid. Serv. 1043

Joseph A. FARACE and Vita Farace, Plaintiffs-Appellees Cross-Appellants, v. INDEPENDENT FIRE INSURANCE COMPANY, Defendant-Appellant

Cross-Appellee.

No. 82-3236.

United States Court of Appeals, Fifth Circuit.

Feb. 14, 1983.

Stafford, Stewart & Potter, Grove Stafford, Jr., Alexandria, La., for defendant-appellant cross-appellee.

Eugene P. Cicardo, James S. Gravel, Alexandria, La., for plaintiffs-appellees cross-appellants.

Appeals from the United States District Court for the Western District of Louisiana.

Before RANDALL and HIGGINBOTHAM, Circuit Judges, and McDONALD ^*, District Judge.

RANDALL, Circuit Judge:

The defendant, Independent Fire Insurance Company, has appealed from a jury verdict rendered in favor of the plaintiffs, Joseph and Vita Farace, which awarded the plaintiffs fire insurance proceeds less a partial credit for payments made to the mortgagees. On appeal, the defendant claims (1) that the judge's instructions to the jury were an inaccurate statement of Louisiana law with regard to the insurer's defense of arson; (2) that the judge erred in excluding testimony concerning the plaintiffs' failure to cooperate with the fire marshal; and (3) that the defendants were entitled to a credit against the judgment including interest and attorneys' fees, as well as the amount paid on the mortgage itself. The plaintiffs have cross-appealed the trial judge's failure to award them attorneys' fees and penalties. For the reasons set forth below, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND.

On Monday evening, September 8, 1980, the plaintiffs left their home in Alexandria, Louisiana and drove to Toledo Bend to spend the night and to go fishing the next day. Before leaving, they made sure that the doors and windows in the house were securely shut and they took their children to the homes of friends to stay the night. No one except the Faraces had a key to the house.

The Faraces testified at trial that they arrived at Toledo Bend and obtained a room at a motel called "White's Landing." While there was no record at the motel of their renting a room, the Faraces produced a gasoline receipt with a charge corresponding to the cost of a room at the motel. The Faraces claimed to have spent the night at the motel, gone fishing the next day, and returned to Alexandria around 5:30 p.m. on September 9, 1980, at which time they learned about the fire.

The city firefighters were called to the fire and arrived at the burning Farace home around 10:30 p.m. on September 8. The house was locked, and the firefighters had to break the lock on the door to get inside the home to fight the fire. All the windows were down except for one which was open about four inches.

Inside the house, the firefighters found three plastic milk jugs that had contained gasoline. Two of the jugs had partially burned and melted. Gasoline had apparently spilled onto the floor and rugs and there were newspapers on the floor. One of the firefighters also noted that the natural gas line inside the house going to the furnace was broken, and two of the light fixtures had come out of the ceiling and were lying on the floor.

The defendant produced evidence that the plaintiffs had debts totaling over $175,000, including $17,000 in tax liens recorded against them and other judgments taken against them amounting to over $3700. There were three mortgages on the property; two of the mortgage holders were named as loss payees on the Faraces' insurance policy. Mr. Farace had apparently been trying to sell the house, but had not been successful. He explained that the house had become too big for the family because the children had grown, and one was away at college. Mr. Farace's father had also been living with the family, but had passed away before the fire. Mr. Farace raised the fire insurance coverage on the home from $109,000 to $125,000 shortly before the fire on the recommendation of an insurance agent.

The City of Alexandria and the state fire marshal's office both investigated the fire, apparently suspecting arson. Mr. Farace was subsequently indicted for arson and convicted by a jury, but his conviction was set aside for insufficiency of the evidence.

After the fire, Mr. Farace filled out a proof of loss statement and filed a claim under his insurance policy. The defendant refused payment, claiming that the plaintiffs were responsible for the fire. The plaintiffs then brought this diversity action to collect the fire insurance proceeds. After the plaintiffs filed suit, the defendant paid off the mortgages on the property.

At trial, the parties stipulated to the incendiary origin of the fire as well as the amount of the loss to the plaintiffs. The defendant introduced evidence of the plaintiffs' financial difficulties in order to establish the plaintiffs' motive for burning down their own house. The plaintiffs produced their fishing expedition alibi in rebuttal. The jury rendered a verdict in the plaintiffs' favor and the trial judge entered a judgment in accordance with the parties' stipulation, less a credit for payments made by the insurance company on the mortgage principal. The plaintiffs' claim for penalties and attorneys' fees was denied, as was the defendant's motion for a new trial. Both parties filed timely appeals.

II. THE JURY INSTRUCTION.

The defendant first claims as error the trial judge's refusal to give the defendant's requested jury instruction concerning the burden of proof in a case where the insurer relies on the affirmative defense of arson against a suit to collect fire insurance proceeds.

The trial judge instructed the jury that the insurer bore the burden of proving the defense of arson by a preponderance of the evidence, and that it must establish (1) that the fire was of an incendiary origin and (2) that the plaintiffs were responsible for the fire. ¹ The defendant contends that the judge incorrectly informed the jury that the defendant had to prove the plaintiffs' responsibility for the fire. It maintains that once it had established the incendiary origin of the fire and the plaintiffs' motive for setting it--in this case the plaintiffs were allegedly in dire financial straits--that the burden shifted to the plaintiffs to establish that they were not responsible for burning down their house. ²

In reviewing a trial judge's instruction to a jury, we must look at the charge as a whole and we will not reverse unless the instruction as given had a tendency to confuse or to mislead the jury. See Delancey v. Motichek Towing Service, Inc., 427 F.2d 897, 901 (5th Cir.1970); see also 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2558 (1978). Because this is a diversity case, we must determine whether the substance of the charge was a full and proper explanation of state law. See Kroger Co. v. Roadrunner Transportation, Inc., 634 F.2d 228 (5th Cir.1981). We hold that the trial judge's instruction to the jury in this case was an adequate statement of Louisiana arson law.

The Louisiana Supreme Court set forth the standard of proof of arson in Sumrall v. Providence Washington Insurance Co., 221 La. 633, 60 So.2d 68, 69 (1952) (emphasis added):

Inasmuch as the defense is arson, the burden rested upon the insurer to establish, by convincing proof, that the fire was of incendiary origin and that plaintiff was responsible for it. It is well settled that the insurer need not prove its case against a plaintiff beyond a reasonable doubt; it suffices that the evidence preponderates in favor of the defense. Proof, of course, may be and invariably is entirely circumstantial. And, in these instances, a finding for defendant is warranted where the evidence is of such import that it will sustain no other reasonable hypothesis but that the claimant is responsible for the fire.

See also Rist v. Commercial Union Insurance Co., 376 So.2d 113 (La.1979). The defendant emphasizes that the court then went on to state that "[m]otive plus the incendiary origin of the fire would, in the absence of believable rebuttal evidence, be sufficient to sustain the affirmative defense pleaded by the insurer...." 60 So.2d at 70 (citations omitted). More recently, the Louisiana Court of Appeals, reversing a trial court's judgment in favor of the plaintiff, stated: "[A] perusal of the entire paragraph supports the conclusion that the evidence adduced by defendant was sufficient to maintain its affirmative defense of arson. Once the evidence was sufficient to do so then it was incumbent upon appellee to rebut such evidence." Swindle v. Maryland Casualty Co., 251 So.2d 787, 791 (La.App.) writ denied, 259 La. 885, 253 So.2d 217 (1971).

Neither Sumrall nor Swindle support the defendant's claim that it was entitled to an instruction that the burden shifted to the plaintiffs once the defendant had established motive and incendiary origin. ³ At most, the cases suggest that a plaintiff "must provide evidence to rebut the otherwise sufficiently established affirmative defense of arson." Viviano v. Travelers Insurance Co., 533 F.Supp. 1, 8 (E.D.La.1981). The plaintiffs in this case presented believable rebuttal evidence. They claimed that there was no evidence that they had failed to pay their debts as they became due and maintained that they had substantial assets to cover their debts. Further, they produced documentary evidence and witnesses to corroborate their alibi that they were out of town at the time of the fire.

In essence, the defendant's claim of error involves a confusion between the burden of production and the burden of persuasion. The language in Sumrall relied on by the defendant seems to apply to the burden of production. Sumrall holds that where the insurer establishes incendiary origin and motive, it has met its initial burden of production. It has presented enough evidence to take its arson defense to a jury, and in fact, if the plaintiff fails to reply, the insurer may be...