Southern Farm Bureau Life Ins. Co. v. Burney

• Decision Date: 27 July 1984
• Docket Number: No. LR-C-83-589.,LR-C-83-589.
• Citation: 590 F. Supp. 1016
• Parties: SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY, Plaintiff, v. John Fuller BURNEY, a/k/a John Bruce; Bonnie Burney; and Gerry Barr, Loyall Barr, and C.P. McCarty, Sr., Individually and as Members of the Board of Directors of Helena Rice Drier, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

590 F. Supp. 1016

SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY, Plaintiff, v. John Fuller BURNEY, a/k/a John Bruce; Bonnie Burney; and Gerry Barr, Loyall Barr, and C.P. McCarty, Sr., Individually and as Members of the Board of Directors of Helena Rice Drier, Inc., Defendants.

No. LR-C-83-589.

United States District Court, E.D. Arkansas, W.D.

July 27, 1984.

William H. Sutton, and James M. Simpson, Friday, Eldredge & Clark, Little Rock, Ark., for plaintiff.

L. Ashley Higgins, Roscopf & Higgins, Helena, Ark., for defendant John Fuller Burney.

David Solomon, Helena, Ark., for defendant Bd. of Directors.

Sidney S. McMath, Little Rock, Ark., for defendant Bonnie Burney.

MEMORANDUM OPINION

ROY, District Judge.

This is an unusual and rather bizarre case. Plaintiff Southern Farm Bureau Life Insurance Company has instituted this action to recover from defendants John Fuller Burney, a/k/a John Bruce; Bonnie Burney (Robinson)¹; and Gerry Barr, Loyall Barr, and C.P. McCarty, Sr., individually and as members of the Board of Directors of Helena Rice Drier, Inc., certain sums paid under policies insuring the life of John Burney.

Helena Rice Drier, Inc., was a storage facility for grain and beans, located in Helena, Arkansas. During the relevant period in this case, John Burney was president of the corporation and defendants Gerry Barr, Loyall Barr, and C.P. McCarty, Sr., were members of the Board of Directors of Helena Rice Drier, Inc. Bonnie Bumpers was legally married to John Burney during this time and they had two children.

In January 1976 John Burney was a respected member of the Helena, Arkansas, community. He had an attractive wife and two children.

Due to bad management practices for some considerable period of time, it became apparent in late April and early May that because of serious financial difficulties, Helena Rice Drier, Inc., could not meet its obligations. On May 7, 1976, John Burney arranged a meeting of the farmers who had stored crops at the Helena Rice Drier (many were his friends and neighbors) and he reported that the Helena Rice Drier had no money to pay them and no soybeans in the drier.

Most of the farmers who had lost beans in the failure were angry and at least one person threatened to take John Burney's life. Several lawsuits naming John Burney and the Board of Directors of the Rice Drier as defendants were filed because of their losses. Burney's prior arrangement to purchase farm land collapsed, and he lost the farming equipment that he had slowly accumulated during the preceding years.

By June 11, 1976, John Burney's future in Helena appeared bleak. According to his testimony, during the evening of that day, on his way home, he had to cope with a series of frustrating electric failures in his truck. He testified that while driving toward Helena over the Mississippi River bridge he saw the lights of an on-coming car appear over the crest of the bridge approaching him in his lane of traffic. He pulled the truck to the right to avoid the car and struck the bridge railing. When the truck stopped, John Burney slipped out of the cab. The other vehicle had stopped on the bridge and he could see people getting out and hear them shouting. Alarmed, John Burney slipped over the railing of the bridge, worked his way down a piling, and dropped into the river and swam downstream a short distance. After coming to the east bank of the river he walked to central Mississippi, where he caught a southbound bus. He drifted for the next few months until he settled in Key Largo, Florida.

From the night John Burney departed Helena, Arkansas, he called himself John Bruce. It is undisputed that he told no one his true identity for over six years. He did not resurface until after the Arkansas five year presumption-of-death statute had run. Ark.Stat.Ann. § 62-1601. He now lives in Key Largo, Florida, with his second wife whom he married without being divorced his first wife. They have a child.

After John Burney left Helena, Arkansas, he ignored his legal and moral obligations, including his legal duty to support his wife and family and his responsibilities concerning the Helena Rice Drier, Inc. He caused great anxiety by not notifying them or even his own parents that he was in fact alive.

For a period of over six years John Burney consistently lied about his identity and day after day misrepresented not only himself but all other facts about his background. He carried his fraud to the point of falsifying records required by governmental authorities, including falsifying Social Security information and marriage application records indicating that he had never been married before. He failed to file federal income tax returns and pay taxes to the United States Government.

At trial John Burney testified that he left every aspect of his life in Helena, leaving the impression that he was deceased. He was aware of the presumption of death law (but testified that he thought it was seven years instead of five years). He designed every relevant phase of his life to deceive everyone, including the insurance companies.

The overwhelming weight of evidence, almost undisputed, shows that John Burney, a/k/a John Bruce, was guilty of fraud. As the court said in New York Life Insurance Co. v. Nashville Trust Co., 200 Tenn. 513, 292 S.W.2d 749, 754 (1956), about an insured who stayed hidden under very similar circumstances: "We cannot imagine how acts could be more fraudulent." As long ago as 1846 the Arkansas Supreme Court said that fraud consists in the misrepresentation or concealment of a material fact calculated to deceive and mislead. Dillard's Administrator v. Moore, 7 Ark. 166 (1846).

Defendant John Burney argues that his deception had no bearing on the payment of the insurance proceeds and furthermore that he has received none of the funds paid and has not been unjustly enriched. The Court finds no merit in these contentions.

John Burney was a knowing, participating party to every insurance contract. His fraud permeated the relationships of all of the parties to the degree that any payment or agreement accepted by the parties was a result of the deliberate deception practiced by him.

Because of John Burney's fraud and deception, money was paid on the insurance policies and he is indebted to plaintiff for the sum of $90,000.00 on th policy payments made to Bonnie Burney and $380,000.00 for the payments made to the directors of Helena Rice Drier, Inc.

We now consider the case of Bonnie Burney which differs from that of John Burney.

Plaintiff contends the settlement should be set aside because of fraud, mutual mistake of fact and unjust enrichment.

John Burney resurfaced on December 1, 1982, and returned to Arkansas to visit with his father after having been injured in an industrial accident. He wanted to file suit, and his attorney told him that he would have to make complete disclosure of his past. When this information was conveyed to Bonnie Burney, she immediately, on December 2, 1982, notified Southern Farm Bureau Life Insurance Company that John Burney was not dead.

The Court finds the following evidence supports the position of Bonnie Burney that she acted in good faith, was not guilty of fraud, and that there was no mutual mistake of fact:

1. The Helena Rice Drier truck that John Burney was driving on June 11, 1976, was found wrecked on the Arkansas-Mississippi River Bridge.

2. Hand prints were found on the bridge railing near the truck.

3. The river was dragged and searched and no body was found. However, a body was sighted downriver by two fishermen about two weeks later but was not recovered.

4. Sgt. Tommy Baker of the Arkansas State Police, completing his investigation, advised Bonnie Burney that in his opinion John was dead — that he either took his own life or was killed.

5. Fred Myers, a private investigator, completing his investigation on the limited funds available, reported to Bonnie Burney that it was his opinion that John was dead.

6. The family relationship between John Burney and his wife and children was a good relationship. Bonnie did not believe her husband would leave her and their children.

7. The family had a memorial service at the Methodist Church in Helena. John Burney's daughter, Paula, then seven years of age, participated in the services by reading selected passages from the Scripture.

8. Bonnie Burney is the daughter of Reverend Paul Bumpers, a distinguished Methodist minister. This family would not have conducted the service and placed a gravestone in the cemetery in memory of John Burney had they not fully believed him to be dead.

9. John Burney never communicated with his wife and children or his own parents.

Southern Farm apparently believed John Burney to be alive as indicated by the following:

1. In the complaint of Bonnie Burney on Policy No. 493376A she alleged that "on June 11, 1976, John Fuller Burney was killed ..." In response to this allegation Southern Farm answered, "... Defendant denies that the said insured is dead."

2. Bonnie Burney in her complaint on Policy No. 641625 stated that "on June 11, 1976, John Fuller Burney was killed ..." In response to this allegation Southern Farm answered, "... Defendant denies that the said insured is dead."

3. The date of issue of the "home" policy with the face value of $48,250.00 was June 13, 1973. John Burney disappeared on June 11, 1976. Southern Farm sent quarterly premium notices to Bonnie on this policy, which premiums were paid by her and were received by Southern Farm. These premiums were paid by Bonnie Burney from June 11, 1976, through December 13, 1981.

4. The date of issue of the "retirement" policy with a face value of $37,313.00 was 1975. Southern Farm sent quarterly premium notices on this policy and they were paid by Bonnie Burney and received by Southern Farm beginning after June 11, 1976, and continuing through November 19, 1981.

5. The total of premiums paid on these two policies...