Neises v. Solomon State Bank

• Decision Date: 02 March 1985
• Docket Number: Nos. 56441,56970,s. 56441
• Citation: 696 P.2d 372,236 Kan. 767
• Parties: David NEISES and Marlene Neises, husband and wife, and Board of County Commissioners for Dickinson County, Kansas, Appellants, v. The SOLOMON STATE BANK, Solomon, Kansas, A Corporation, and Trinity Universal Insurance Company of Kansas, Inc., Appellees.
• Court: Kansas Supreme Court

Page 372

696 P.2d 372

236 Kan. 767

David NEISES and Marlene Neises, husband and wife, and Board of County Commissioners for Dickinson County Kansas, Appellants, v. The SOLOMON STATE BANK, Solomon, Kansas, A Corporation, and Trinity Universal Insurance Company of Kansas Inc., Appellees.

Nos. 56441, 56970.

Supreme Court of Kansas.

March 2, 1985.

Syllabus by the Court

1. Before a scientific opinion may be received as evidence at trial, the basis of that opinion must be shown to be generally accepted as reliable within the expert's particular scientific field. If a new scientific technique's validity has not been generally accepted or is only regarded as an experimental technique, then expert testimony based upon its results should not be admitted into evidence.

2. Strong principles of public policy deny the insured the right to recover when he intentionally sets on fire property covered by the insurance contract. The insurer's evidence that the insured set or otherwise caused the fire need not be clear and convincing, exclude any reasonable doubt, preclude other possibility, or be the only reasonable explanation for what occurred. Rather, the insurer's evidence need only be by a preponderance of the evidence or more probably true than not.

3. The standard or union mortgage clause of an insurance contract creates a new and independent contract which entitles the mortgagee to recover under the policy of insurance, notwithstanding the effect of any act or neglect on the part of the owner or mortgagor of the property.

4. It is against public policy for an insured who burns his property to collect insurance on the property. By having the property returned to him after the insurer has discharged the debt for which the insured was personally liable would certainly unjustly benefit the insured. The only choice, then, is to assign the property to the insurer so that it may be indemnified, at least to some extent, for its loss due to the fraud of the insured.

Doug Thompson, of Bengtson, Waters & Thompson, Chartered, Abilene, argued the cause, and Richard F. Waters, Abilene, of the same firm, was with him on the briefs, for appellants David and Marlene Neises.

Hal D. Metzler, of Turner & Boisseau, Chartered, Wichita, argued the cause, and Casey R. Law and Hannelore Kitts, Great Bend, of the same firm, were with him on the briefs, for appellee Trinity Universal Ins. Co. of Kansas, Inc.

LOCKETT, Justice:

This is a consolidated appeal involving a bifurcated trial. The first action, for breach of contract to collect insurance benefits pursuant to a proof of loss claim filed with the appellee insurance company for a fire loss to the appellants' residence, was tried to a jury. The second part of the bifurcated action, concerning the failure of the insurer to reserve its rights before making an election for partial payment of insurance proceeds and for determination of whether the insurer's contract was void as against public policy, was tried before a second judge.

In 1978, the appellants, David and Marlene Neises, who were engaged in the construction/remodeling business at Solomon, Kansas, began building a Shane Modular Home to qualify as representatives for that company. To cover the costs as the work progressed, the Neises obtained construction loans from the Solomon State Bank (Bank). The Neises occupied the house as their family residence while constructing the home.

In late 1979, the construction/remodeling work in the Solomon area slowed considerably, and David Neises decided to relocate the family business in Wichita. The Neises purchased a residence there in the fall of 1980. The value of the Solomon house was appraised at $104,640.00. From the end of 1979 through the spring of 1981, though listed with various realtors at various prices, the Neises were unable to find a buyer for the house.

When the Neises were unable to pay their mortgage payments for the Solomon house, in March of 1981 the Bank requested that the property be listed for sale at $47,500.00. On May 18, 1981, the Bank instructed its attorney to foreclose on the real estate.

On June 24, 1981, the Neises conducted an auction of the residence. The mortgage holder, the Bank, was the highest bidder at the auction, bidding the amount due on their mortgage. Owing money on two mortgages, the Neises declined to sell to the Bank.

Following the unsuccessful auction, David Neises approached a friend, Charles Halton of Wichita, and persuaded Halton to enter into a sham sales contract for the purchase of the residence in Solomon. On June 29, 1981, a sham contract was signed, and David Neises notified the Bank that a purchaser for the residence was willing to pay $58,500.00, and he had received a check for $5,000.00 as earnest money.

From the time construction of the home was commenced, the Neises had homeowners insurance coverage on their Solomon house in the amount of $80,000.00 with Kansas Fire and Casualty Insurance Company. When the house became vacant, it no longer qualified for coverage under a homeowner's policy.

An independent agent, at the request of Kansas Fire and Casualty, contacted Marlene Neises and advised her of the need to rewrite coverage. The Neises decided to cancel coverage with Kansas Fire and Casualty Insurance Company and obtain fire and extended coverage with the appellee, Trinity Universal Insurance Company of Kansas, Inc. (Trinity) for $80,000.00. The premium was paid by the Neises and accepted by Trinity and the policy issued.

By July 31, there had been no indication Mr. Halton was a qualified buyer, so on August 4, 1981, a foreclosure action was filed by the Bank. After meeting with their attorneys in late October, 1981, the Neises filed their answer out of time.

On August 9, 1981, between 3:00 and 4:00 a.m., the home in Solomon was wholly destroyed by fire. The fire had been deliberately set by placing tires in the structure at different locations on the lower and upper levels and pouring a flammable liquid over them.

On September 25, 1981, David Neises filed a proof of loss. Trinity denied payment claiming the insured had burned the home. Trinity did pay the Bank, under the binder issued, the amount of the outstanding mortgage. Legal actions were commenced by the Neises to collect the insurance proceeds.

During the jury trial, the judge admitted as evidence some, but not all, of the results of a psychological stress evaluation (PSE) prepared from an interview with David Neises. The interview was conducted by Ivan Saunders, an independent fire investigator employed by Trinity to investigate the fire.

The court found that certain PSE evidence was probative and material. In those instances where Trinity's counsel could corroborate by substantial evidence the results of the test, independent of the PSE test, the court allowed the PSE testimony to be presented to the jury as evidence based upon a scientific technique.

The Neises argue that the admission of the results of the PSE evaluation were prejudicial and reversible error. Trinity disagrees.

Saunders testified at trial as to his experience as an examiner and his use of the PSE equipment. He had based his evaluation of David Neises on a taped interview. Neises was unaware that the interview was being tape recorded and would be evaluated. Trinity proffered the evaluation of the responses to 22 questions, but the court allowed only 11 responses for which there existed substantial independent evidence to be presented to the jury.

The PSE is basically a voice lie-detector test. The principle underlying the test is that the human voice has many frequencies or a number of sound waves. In addition to the voice that can be heard, there are a series of low frequency sound waves which are inaudible to the human ear. When a person is under stress or lying, these sound waves tend to disappear, due to physiological changes in the body.

In order to conduct the test, the subject is asked certain questions and the answers are recorded on a tape recorder. This tape is reduced in speed and is fed into a psychological stress evaluator, which is similar to an electrocardiogram machine. Based on the reading of the chart from this machine, the examiner determines whether the subject is lying or telling the truth.

The PSE does not detect deception per se. It records reactions to a given situation, most commonly a question and answer session. Those reactions may be charted, and the interpretation of those reactions may lead the examiner to conclude that an individual is lying. Lie detection relies on one basic principle: an individual undergoing stress will exhibit certain involuntary reactions caused by that stress. See Kenety, The Psychological Stress Evaluator: The Theory, Validity and Legal Status of an Innovative "Lie Detector," 55 Ind.L.J. 349 (1980).

In Kenety's article, he noted that the PSE and the polygraph operate similarly. Both rely on the fact that deception causes stress and that stress causes psycho-physiological changes. While the polygraph measures changes in the subject's heartbeat, respiration and perspiration, the PSE measures changes in the subject's voice. While Kenety stated that the PSE has many advantages over the polygraph, he said that the PSE has had far less scientific substantiation than the polygraph:

"There have been no controlled scientific field studies of the PSE conducted by a disinterested party. The results of laboratory simulations have been inconclusive and conflicting, and although field results and manufacturers' studies have indicated that the PSE may have considerable utility, as yet they have not been validated by independent research. These field tests hold out the hope that the PSE could be a valuable tool in the detection of deception and indicate that further study is warranted. As yet, however, the extent of its validity remains undetermined." 55 Ind.L.J. at 357.

This court considered the admissibility of new scientific...