Firemen's Ins. Co. of Newark v. Smith

• Decision Date: 05 June 1950
• Docket Number: No. 14045.,14045.
• Citation: 180 F.2d 371
• Parties: FIREMEN'S INS. CO. OF NEWARK, N. J. v. SMITH et al.
• Court: U.S. Court of Appeals — Eighth Circuit

180 F.2d 371 (1950)

FIREMEN'S INS. CO. OF NEWARK, N. J. v. SMITH et al.

No. 14045.

United States Court of Appeals Eighth Circuit.

February 28, 1950.

Rehearing Denied March 23, 1950.

Writ of Certiorari Denied June 5, 1950.

COPYRIGHT MATERIAL OMITTED

Ronald S. Reed, St. Joseph, Mo. (Clausen, Hirsh & Miller, Chicago, Ill., on the briefs), for appellant.

Lewis F. Randolph, St. Joseph, Mo. (Stanley I. Dale, St. Joseph, Mo., on the brief), for appellees.

Before SANBORN, THOMAS and JOHNSEN, Circuit Judges.

Writ of Certiorari Denied June 5, 1950. See 70 S.Ct. 1028.

THOMAS, Circuit Judge.

This is an appeal from a judgment for the defendants in a proceeding for a declaratory judgment under the Declaratory Judgment Act, 28 U.S.C.A. § 2201, c. 139, § 111, 63 Stat. 105. Jurisdiction is predicated upon diversity of citizenship and the requisite amount involved. The opinion of the court is set out in D.C., 83 F.Supp. 668.

On March 11, 1947, plaintiff insurance company issued to defendants Smith its policy of fire insurance, agreeing to indemnify them for a period of one year in the amount of $5,000, subject to the provisions of the policy, against loss and damage by fire to a building situated just outside the corporate limits of the city of St. Joseph, Missouri.

The insured building was destroyed by fire on April 7, 1947, and on June 2, 1947, defendants delivered verified proof of loss to plaintiff, claiming a total loss.

Plaintiff in this proceeding instituted December 8, 1948, sought a judgment declaring that it was not liable to defendants and asking that the policy be cancelled and declared null and void, and for other relief. Defendants answered asking that plaintiff be declared liable for the loss and asking that they have judgment on the policy and for damages for vexatious delay and an attorney's fee and costs.

Neither party having requested a jury, the court at its own instance called an advisory jury. At the close of the evidence the court, having instructed the jury, submitted to them three special interrogatories which with the jury's answers thereto are as follows:

1. Do you find from the evidence that the use of the insured premises for gambling and the illegal sale of intoxicating liquor or either of them, increased the hazards of destruction by fire of the insured premises?

Answer: No.

2. Do you find from the evidence that C. M. White, the agent of the company, personally inspected the premises prior to the issuance of the policy of insurance sued on?

Answer: Yes.

3. If your answer to the last interrogatory be "Yes" was there present on the premises at the time of such inspection, evidence of gambling and the illegal sales of liquor, or either of them, which were obvious or apparent to the said White?

Answer: Yes.

The court then made findings of fact and conclusions of law and entered judgment in favor of defendants and against plaintiff. The motion of plaintiff for a new trial was overruled, and this appeal followed.

The contentions of appellant are: 1. That the court erred in calling a jury in an advisory capacity; 2. That the policy was void (a) because of false and fraudulent representations by appellees before the policy was issued, (b) because of false swearing by appellees in their proof of loss and in their depositions (c) in that the hazard insured against was increased by means within the control or knowledge of the insured, (d) because of breach of warranty in respect of the use of the premises, and (e) in that it did not waive any of the conditions of the policy; and 3. That the court erred in allowing damages against appellant for vexatious delay and an attorney's fee.

Appellant first contends that "the court erred in calling a jury in an advisory capacity over the appellant's objections and submitting interrogatories to it, for the reason that it was mandatory upon the trial court to try and decide the issues without the aid or advice of a jury, the parties having waived the right to trial by jury and having made no motion for same."

We find no place in the record where counsel for appellant objected to the calling of a jury. In the opinion of the court is the statement that "Neither the plaintiff nor the defendants requested a jury. * * * Prior to the time the case was called for trial, the court advised the parties that the court would, of its own motion, call a jury to try and determine such disputed facts as might arise during the trial."

The record shows that a jury was examined on their voir dire and duly selected and sworn, after which counsel for each party made opening statements to the jury. At the close of the evidence counsel for appellant requested separate instructions upon the issues; but made no objections to trial to the jury. Again, after the court had instructed the jury, counsel for appellant took exceptions to certain instructions given and to the failure of the court to give all the instructions requested by him.

While the verdict of the jury is limited to answers to the three interrogatories, supra, the court's findings of fact and conclusions of law covered every issue in the case.

There can be no doubt that the parties to a declaratory judgment proceeding presenting legal issues are entitled to a trial by jury as of right, Rule 38(a), when demanded as provided in Rule 38 (b, c). Federal Rules of Civil Procedure, 28 U.S.C.A. Unless demanded they are presumed to have waived the right, but the court may upon motion of either party order a jury trial of any or of all issues, but the court may not order a trial by jury on its own initiative. 3 Moore, Federal Practice, 3030, § 39.03.

If the issues are purely equitable the court has the right to call a jury in an advisory capacity and to submit such issues of fact as he may elect. Or, with the consent of the parties, the court may order a trial by jury, and the verdict will have the same effect as if trial by jury had been a matter of right.

If the issues are both legal and equitable, the court, by the same procedure, may submit to the jury both legal and equitable issues. In any case the consideration to be given to the verdict depends upon whether the issues are legal or equitable. Hargrove v. American Cent. Ins. Co., 10 Cir., 125 F.2d 225; (American) Lumbermens Mut. Casualty Co. v. Timms & Howard, Inc., 2 Cir., 108 F.2d 497, and cases cited.

Since appellant asked that the policy be cancelled the issue tendered by the complaint was equitable; and since appellees asked that appellant be declared liable for damages the issue tendered by them was legal in its nature.

One of the grounds on which appellant demanded that the policy be cancelled was that the use of the insured premises for a gambling establishment and a place for the illegal sale of intoxicating liquor increased the fire hazard. The first interrogatory propounded to the jury related to this issue and was, therefore, advisory only.

One of the defenses alleged in the answer was that appellant's agent White had inspected the insured premises before the policy was issued and at the time of such inspection evidence of the use of the premises for gambling and the illegal sales of liquor was obvious and apparent to White; and appellees contend that appellant thereby waived any defense which it might otherwise have to such use of the premises. The second and third interrogatories submitted to the jury related to this issue of fact pleaded as a defense.

It follows that the court did not err in calling an advisory jury. It also follows that appellant cannot be heard to complain because it in effect agreed to trial by an advisory jury in that it saved no objection to the jury, but acquiesced in the procedure. See the Hargrove and Lumbermens cases, supra, and the cases cited therein.

It is elementary that a court of equity, in the exercise of its powers, may, having jurisdiction over the cause, determine all matters at issue and make a final decree granting full relief to the parties. Alexander v. Hillman, 296 U.S. 222, 242, 56 S.Ct. 204, 80 L.Ed. 192; Cathcart v. Robinson, 5 Pet. 264, 277, 30 U.S. 264, 8 L.Ed. 120; McGowan v. Parish, 237 U.S. 285, 35 S.Ct. 543, 59 L.Ed. 955; Banco Commercial De Puerto Rico v. Boscana, 1 Cir., 100 F.2d 449, 452; McComb v. Frank Scerbo & Sons, Inc., D.C. N.Y., 80 F.Supp. 457, 458.

Further, it should be noted that the appeal here is not from the verdict of the jury but from the judgment entered by the court, and the judgment is supported by complete findings of fact on every issue. The important question for consideration on this appeal is whether the findings are supported by substantial evidence.

The policy of insurance provides:

"This entire policy shall be void 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 the interest of the insured therein or in case of any false swearing by the insured relating thereto.

* * * * * *

"Conditions suspending or restricting insurance. Unless otherwise provided in writing added hereto this Company shall not be liable for loss occurring

"(a) while the hazard is increased by any means within the control or knowledge of the insured; or * * *."

The court made separate findings of fact on each of these points and found against appellant. The findings are supported by substantial evidence. The elements of a fraudulent representation under Missouri law are (1) its falsity, (2) its materiality, (3) knowledge of its falsity or ignorance of its truth on the part of the person making the representation, (4) intent that it should be acted upon, (5) ignorance of its falsity on the part of the person to whom the representation was made, (6) his reliance on its truth, (7) his right to rely thereon, and (8) his consequent and proximate injury. Maupin v. Provident Life & Accident Ins. Co., Mo.App., 75 S.W.2d 593, 596. Where the evidence is in conflict the...