Smith v. State Farm Fire and Cas. Co., 79-2103

• Decision Date: 22 December 1980
• Docket Number: No. 79-2103,79-2103
• Citation: 633 F.2d 401
• Parties: 7 Fed. R. Evid. Serv. 895 Gladys Hall Hamrick SMITH, Individually and as Executrix of the Estate of Bethel T. Smith, Deceased, Plaintiff-Appellee, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 401

633 F.2d 401

7 Fed. R. Evid. Serv. 895

Gladys Hall Hamrick SMITH, Individually and as Executrix of the Estate of Bethel T. Smith, Deceased, Plaintiff-Appellee, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellant.

No. 79-2103.

United States Court of Appeals Fifth Circuit.

Dec. 22, 1980.

Frank M. Gleason, Rossville, Ga., for defendant-appellant.

Archer, Elsey & Vaughn, Stanley D. Tilley, William T. Elsey, Cartersville, Ga., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before RONEY, HILL and FAY, Circuit Judges.

RONEY, Circuit Judge:

In this diversity action, defendant State Farm Fire & Casualty Co. (State Farm) appeals from a jury verdict in favor of the insured plaintiff on a fire loss. State Farm contends the district court erred in excluding evidence of other fires destroying property owned by the policyholder and in refusing to find that the policyholder's trustee in bankruptcy was an indispensable party. We affirm, holding the district court did not abuse its discretion in refusing to admit the evidence and did not err in concluding under the facts in this case that the trustee in bankruptcy was not an indispensable party.

The fire which is the subject of this suit occurred on March 19, 1976, destroying property owned by Bethel and Gladys Smith. When State Farm became suspicious of the origin of the fire and refused to pay on the policy which insured the premises, the Smiths sued. State Farm's chief defense was that at the time Bethel Smith obtained the policy from State Farm, he intended to defraud State Farm by burning his home and in fact did procure the purposeful burning of his home to collect on the insurance policy.

In response to Requests for Admission, plaintiff admitted that Bethel Smith had owned five other dwellings which had been destroyed by fire and for which insurance had apparently been collected. The five were: (1) a house in Cobb County, Georgia, destroyed by fire in 1961; (2) a house in Cobb County, Georgia, destroyed by fire in 1962; (3) a house in Adairsville, Georgia, destroyed by fire in 1964; (4) a house in Adairsville, Georgia, destroyed by fire in 1972; and (5) a trailer in Calhoun, Georgia, destroyed by fire in 1974.

In an attempt to show Bethel had the intent to defraud when he took out the policy and was involved in a plan or scheme to defraud, the insurance company proffered evidence concerning these fires. The district court refused to admit evidence as to any but the last fire, the one in 1974. The district court's decision to admit evidence of the 1974 fire appears to hinge on the fact that on April 7, 1975, when the Smiths applied for fire insurance, one of the questions on the application was whether the applicants had suffered any fire loss within the last three years. The 1974 trailer loss was reported in the application. The other four fires, however, fell outside the three-year period inquired about in the application. Although the agent who sold the policy testified that he asked Smith if he had ever suffered any other fire losses and had received a negative reply, the court refused to admit this testimony on the ground that the application on its face was limited to a three-year period.

A. Admissibility of Evidence of Other Fires

Because of the limited scope of the question in the application form, there was a significant difference between evidence of fires occurring before and after the three-year period. Evidence of the 1974 fire, which came within the application period, was relevant and the danger of undue prejudice was outweighed by its probative value.

As to the other four fires, State Farm argues that the district court did not conduct the kind of analysis and balancing required by the law but instead drew an arbitrary line at three years. Our review of the record convinces us, however, that the district court did conduct the type of analysis required when evidence of prior conduct is offered to prove a common scheme, plan or intent.

The applicable rule is Fed.R.Evid. 404(b), which provides as follows:

Other Crimes, wrongs, or acts. Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show that he acted in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.

In United States v. Beechum, 582 F.2d 898 (5th Cir. 1978) (en banc), this Court set forth a two-part test for determining the admissibility of evidence under this rule. State Farm contends the Beechum test is applicable to civil actions, an argument we accept for the purposes of this appeal without analysis or decision.

The Beechum test is stated as follows:

First, it must be determined that the extrinsic offense evidence is relevant to an issue other than the defendant's character. Second, the evidence must possess probative value that is not substantially outweighed by its undue prejudice and must meet the other requirements of rule 403.

582 F.2d at 911. Under the first part of the test, the standard for relevancy is established by Fed.R.Evid. 401. In addition, the two acts must be significantly similar with respect to the issue to which the evidence of the extrinsic act is addressed, and there must be evidence showing that the extrinsic act in fact occurred and the person accused of committing the act in fact did so. Even if the extrinsic act is found to be relevant, however, substantial doubt as to its similarity and as to whether defendant committed the act will necessarily dilute its probative value for purposes of the balancing required in the second part of the Beechum test. As in all balancing under Rule 403, the district court may exercise its sound discretion in deciding whether to admit the evidence.

Although the record is somewhat confused because the district judge at first based his admissibility ruling on the three-year policy application theory, and admitted evidence of the 1974 fire on the basis of that theory, it is apparent from the record that, with regard to the other fires, the district judge eventually conducted the type of analysis called for in Beechum. He repeatedly indicated that the question of admissibility depended upon a showing by State Farm that the extrinsic acts were relevant to the issues. He stated he did not find the earlier fires sufficiently similar in their circumstances nor near enough in time to the fire in this case. Finally, the judge demonstrated an awareness of the prejudice the evidence would cause plaintiffs. These are precisely the factors to be considered under a Beechum analysis, so that the sole issue remaining for this Court is whether the judge abused the sound discretion he enjoys in Rule 403 evidentiary matters.

The district court cannot be faulted for refusing to admit the mere fact Bethel Smith had owned five insured buildings destroyed by fire. Without more, the relevancy of such evidence is highly questionable and the prejudice would be great.

The evidence concerning the prior fires was essentially as follows:

As to the 1961 fire, no evidence was proffered. The only indication of it in the record is plaintiffs' admission.

As to the 1962 fire, the only evidence in the record is the testimony of Bethel's ex-wife, who testified that in 1971 or 1972, shortly after they were married and some ten years after the fire, she and Bethel had a conversation about fires. Her report of the conversation was the following:

He said that they had a fire in Acworth, didn't say where at, he just said Acworth, and he smiled and said lightning struck it and I said, "Lightning?"

And he said, "Well, we burned it." He didn't say "we" who. He said, "We burned it." Said that he was running short of money, and that he needed the money, and we burned it. That's all he said.

This testimony was given in 1978. Given the time lapse, the vague nature of the testimony, and the potential for undue prejudice, we cannot say the district judge abused his discretion in refusing to admit this evidence.

As to the 1964 fire, the ex-wife testified that in the same conversation Bethel admitted to her that he had burned his house in 1964 because he was running short of money. Her testimony was simply the following:

A. And then he told me he used to own a sugar shack and that we burned the sugar shack. He did not call no names (sic), just "We burned the sugar shack."

Q. Now, what did he tell you about the house in Adairsville (the "sugar shack") that burned?

A. He just told me it burned.

Q. Did he say anything else?

A. No, sir.

In addition, a former investigator with the Georgia State Fire Marshal's office stated that he concluded that the fire which destroyed the building burned in 1964 was "an arson fire, a fraud fire." The investigator admitted he had not gone to the scene of the fire until more than two months afterwards and after 14 years he didn't...