Movie Distributors Liquidating Trust v. Reliance Ins. Co.

• Decision Date: 02 August 1991
• Parties: MOVIE DISTRIBUTORS LIQUIDATING TRUST, as Successor in Interest to VTR Movie Distributors, Appellee, v. RELIANCE INSURANCE COMPANY, Appellant.
• Court: Pennsylvania Superior Court

Page 1302

595 A.2d 1302

407 Pa.Super. 588

MOVIE DISTRIBUTORS LIQUIDATING TRUST, as Successor in

Interest to VTR Movie Distributors, Appellee, v. RELIANCE INSURANCE COMPANY, Appellant.

Superior Court of Pennsylvania.

Argued June 6, 1991.

Decided Aug. 2, 1991.

[407 Pa.Super. 589] Avrum Levicoff, Pittsburgh, for appellant.

Jan C. Swensen, Pittsburgh, for appellee.

Before OLSZEWSKI, HUDOCK and HOFFMAN, JJ.

HUDOCK, Judge:

This is an appeal from the judgment denying post-trial motions following a jury trial in which Appellee was awarded $67,500 in damages, plus pre-judgment interest, under a fidelity insurance policy written by Appellant. At the conclusion of the evidence, Appellant moved for a directed verdict, but the trial court denied the motion and submitted the case to the jury for its verdict. Timely post-trial motions were filed, requesting a judgment notwithstanding the verdict, and denied. Appellant then filed this appeal. We affirm.

The facts as summarized by the trial court are:

VTR was in the business of wholesaling videos releases to dealers for personal home video use. VTR purchased comprehensive dishonesty disappearance and destruction coverage from [Appellant], designed in part to cover against employee theft. The policy provided for up to $100,000 of coverage resulting from employee dishonesty and theft, with a $5,000.00 deductible. VTR ultimately determined that employee theft was in fact occurring at its Elmsford, New York warehouse. In January of 1986, VTR initiated its own investigation based on a tip received by the company. The fact of theft was ultimately confirmed when Paul Pasquarelli, William Pilossoph and others [executives of VTR] traveled from Pittsburgh to New York. On that trip, [they] visited an apartment leased by VTR and occupied by employee David Fabus. Found in that apartment were numerous video tapes, many of which were duplicates of the same title. Also found in the apartment were several VCR players. When confronted, Fabus ultimately admitted that he had been stealing the "hot" titles and reselling these. These tapes constituted VTR's inventory.

Patricia Murphy, another employee of VTR, also testified to having observed various employees stealing tapes. Murphy also saw boxes of tapes placed near the doors. These boxes were later missing. VTR filed a timely proof of loss with [Appellant], who claimed they were not liable under the within policy.

[VTR] presented the expert testimony of Daniel Aizley, a certified public accountant who specialized in analyzing claims filed against insurance companies. Aizley testified that in his opinion, VTR's loss was well in excess of $105,000.00 [VTR] also called Alan Cohen, who was VTR's vice president of finance and administration at the time that the theft was discovered. Cohen testified at length concerning the steps taken to verify the amount of the loss, as well as the submission of the claim and proof of loss to [Appellant]. Cohen testified that numerous physical inventories were examined, with an emphasis on the "hot" titles that were released during the known time period of the thefts. Cohen, a certified public accountant, also testified to the gross profit levels at the company's various warehouses. The profit level for the New York warehouse during the period of the theft was significantly less than for the company's other branches.

based upon his analysis of documents presented to him by VTR.

(Trial Court Opinion at 2-4).

Appellant raises four issues in this appeal: (1) whether the testimony of Paul Pasquarelli concerning his conversation with employee David Fabus was inadmissible hearsay; (2) whether the trial court should have permitted Alan Cohen to be cross-examined about a lawsuit filed against VTR by W.R. Grace Co. (the company that ultimately purchased VTR); (3) whether the trial court correctly construed the clause in the insurance contract excluding proof of loss based on inventory or profit and loss computations; and (4) whether VTR is entitled to pre-judgment interest.

The standard we apply when reviewing the denial of a motion for directed verdict and motion for judgment n.o.v. is whether the trial court abused its discretion or committed an error of law which controlled the outcome of the case.

In ruling upon these motions, the trial judge must consider 'the evidence, together with all reasonable inferences that may be drawn therefrom ... in the light most favorable to the verdict winner.' Accepting as true all facts and proper inferences which tend to support the contention of the party against whom the motion has been made, and rejecting all testimony and inferences to the contrary, the trial judge must grant said motions when no two reasonable minds could differ that, as a matter of law, the party has failed to make out his case.

Timbrook v. Foremost Insurance Co., 324 Pa.Super. 384, 387, 471 A.2d 891, 892-93 (1984) (citation omitted).

We will take the issues in the order presented above. First, it is well-settled that whether evidence is admitted or excluded is within the discretion of the trial judge and will not be reversed absent a clear abuse of that discretion. Walasavage v. Marinelli, 334 Pa.Super. 396, 483 A.2d 509 (1984). Appellant argues that it was an abuse of discretion for the trial court to permit Paul Pasquarelli to testify concerning his conversation with David Fabus because that conversation constitutes hearsay and does not qualify as a statement against interest. Our Supreme Court recently discussed hearsay and the statement against interest exception in Heddings v. Steele, 514 Pa. 569, 526 A.2d 349 (1987):

Hearsay is an out-of-court statement offered into evidence to prove the truth of the matter asserted. A hearsay statement lacks guarantees of trustworthiness fundamental to the Anglo-American system of jurisprudence. Perhaps such a statement's most telling deficiency is it cannot be tested by cross-examination. According to Dean Wigmore, cross-examination is 'beyond any doubt the greatest legal engine ever invented for the discovery of truth.' 5 Wigmore, [Evidence] § 1367. Nor is the declarant under oath when the out-of-court statement is uttered. This court has long recognized the oath requirement as a further assurance of reliability. Out-of-court declarations also deprive the trier of fact of an opportunity to examine the demeanor of the declarant. Moreover, an in-court declarant may be impressed with the solemnity of the proceeding and may be reluctant to lie in the face of the party against whom the statement is directed.

* * * * * *

Under the law of this Commonwealth, declarations against pecuniary or proprietary Id. at 573, 574-75, 526 A.2d at 351, 352 (citations omitted). To qualify as a statement against interest, the party seeking to have the testimony admitted must show that the statement was against the declarant's penal interest at the time the statement was made, and the declarant must be unavailable at the time of trial. Commonwealth v. Colon, 461 Pa. 577, 582, 337 A.2d 554, 557 (1975). Applying this analysis to the present case, David Fabus was arrested and later released on bail after Pasquarelli posted his bond. Pasquarelli and Fabus went back to the Elmsford, New York warehouse and talked about the thefts. Fabus told Pasquarelli that he had been taking the tapes and selling them at below market price. Fabus spoke in detail about some of the movie titles taken and about the quantity taken. Pasquarelli testified that he was unable to locate Fabus to testify at trial, although he had made several attempts to locate Fabus. Pasquarelli and Fabus talked after Fabus was arrested but before Fabus was tried on the theft charges. Therefore, Fabus' confession to Pasquarelli, although it contained nothing which would subject Fabus to greater penalty than he was already facing by the charges, was made before any conviction, and would likely be evidence of guilt which could have been used against Fabus later. Fabus was unavailable to testify. We find that both elements of the statement against interest exception have been satisfied and it was proper for the trial court to permit Pasquarelli to testify concerning his conversation with Fabus.

                interest are admissible as a hearsay exception.  Such statements are deemed reliable as '[p]eople are apt to speak freely and falsely in their own favor but are reluctant to speak falsely to their pecuniary or proprietary detriment.'   This Court has recently abandoned the historical limitation to statements against one's pecuniary or proprietary interest to incorporate statements against one's penal interest
                

Secondly, Appellant argues that it was error for the trial court to refuse to permit Appellant to cross-examine witness Alan Cohen about a lawsuit filed against VTR by W.R. Grace Co., purchaser of VTR. The trial court stated in its opinion:

The stated purpose of this line of questioning was to 'attack the credibility of the profit and loss evidence offered on direct ...' Defendant's Statement of Matters Complained of on Appeal at p. 4.

The mere fact that VTR had been accused of fraudulent misrepresentation in a lawsuit that was ultimately settled does not make this a relevant fact with which to impeach the credibility of [VTR's] profit and loss evidence. This proffered line of questioning lacked any probative value whatsoever. Assuming that this evidence was even somewhat probative, we believe that the prejudice from this attempted line of questioning clearly outweighed any probative value. This line of questioning was also a collateral attempt at attacking credibility, and would have only served to raise other issues that could have confused the jury. It is unquestioned that a '... court may exclude evidence that is irrelevant, confusing, misleading, cumulative, or prejudicial.' Concorde Investments, Inc. v. Gallagher, 345 Pa.Super. 49, 497 A.2d 637, 641 (1985); Martin v. Soblotney, 502 Pa. 418, 422, 466 A.2d...