State Farm Mut. Automobile Ins. Co. v. Bonacci, 11468.

• Decision Date: 22 April 1940
• Docket Number: No. 11468.,11468.
• Parties: STATE FARM MUT. AUTOMOBILE INS. CO. v. BONACCI et al.
• Court: U.S. Court of Appeals — Eighth Circuit

111 F.2d 412 (1940)

STATE FARM MUT. AUTOMOBILE INS. CO. v. BONACCI et al.

No. 11468.

Circuit Court of Appeals, Eighth Circuit.

April 22, 1940.

W. C. Fraser, of Omaha, Neb. (C. F. Connolly and Crofoot, Fraser, Connolly & Stryker, all of Omaha, Neb., on the brief), for appellant.

E. D. O'Sullivan, of Omaha, Neb. (C. J. Southard and George H. Merten, both of Omaha, Neb., on the brief), for appellees.

Before STONE, GARDNER, and SANBORN, Circuit Judges.

GARDNER, Circuit Judge.

This is an appeal from a judgment in a proceeding for a declaratory judgment, in which appellant sought to avoid liability under the provisions of a policy of automobile liability insurance because of the failure of its insured, Thomas Cerra, actively to cooperate in accordance with a provision in the policy, in defending separate actions brought by appellees Antonio Bonacci and Angelina Bonacci against the appellee Thomas Cerra, the insured, for damages arising out of an automobile accident, and because the insured was guilty of conspiracy and fraud in conniving and colluding with the Bonaccis in such damage actions. It will be convenient to refer to the parties as they were designated in the lower court.

The policy, which plaintiff had issued covering Cerra's car, contained provision that the insurer would, within limits not here material, protect the insured against liability for bodily injuries to others. It contained the following provision: "It is a condition of this insurance that the Assured, when requested by the Company, shall aid in effecting settlements, securing information and evidence, securing the attendance of witnesses and in prosecuting appeals, and shall, throughout such litigation, actively co-operate with the Company and its representatives in the defense thereof, and attend upon any hearing or hearings therein, when requested by the Company or its representatives."

The policy also contains provision that it should be void in the case of any "fraud, attempted fraud, or false swearing by the Assured touching any matter relating to this insurance or the subject thereof, whether before or after a loss."

On August 15, 1935, the automobile covered by this insurance policy, while being driven by the insured, met with an accident on a paved highway about five miles east of Grand Island, Nebraska. At the time, defendants Antonio Bonacci and Angelina Bonacci occupied the rear seat as guests of the insured. The automobile got out of control of the driver and went into the ditch on the left side of the paved highway, causing injuries to the defendants Antonio Bonacci and Angelina Bonacci, his wife.

In October, 1935, the Bonaccis commenced separate actions against Cerra in the District Court of Douglas County, Nebraska, to recover damages for the injuries sustained in the accident. The case of Antonio Bonacci was first tried in January, 1937, and resulted in a verdict in favor of the defendant in that case. On appeal the judgment was affirmed by the Supreme Court. Bonacci v. Cerra, 134 Neb. 476, 279 N.W. 173. The case of Angelina Bonacci was postponed because of Cerra's absence, but was tried in March, 1937, resulting in a verdict for the defendant. In April, 1937, a new trial was granted in the last named case, and it was again tried in May, 1937, and resulted in a verdict for the plaintiff. On appeal, however, the judgment was reversed by the Supreme Court. Bonacci v. Cerra, 134 Neb. 588, 279 N.W. 314. The present proceeding was then commenced against Cerra and the two Bonaccis, seeking an adjudication that the insured had violated the provisions of the policy in the respects heretofore mentioned. Plaintiff in the instant case defended Cerra in the personal injury actions brought by the Bonaccis, but with a reservation that it did not waive the right to deny liability to its insured. In the instant case the lower court determined the issues in favor of the defendants.

On this appeal, plaintiff contends that the evidence shows that the insured failed actively to cooperate with the insurer, and that he was guilty of fraudulently conspiring with the Bonaccis to create a cause of action for the recovery of damages for injuries sustained in the accident for which the plaintiff would be liable under its contract. If the insured failed actively to cooperate in the defense of the damage actions brought by the Bonaccis, or if he fraudulently conspired with these adverse parties to create the appearance of a valid cause of action against him, then the contractual obligation of the insurer would terminate and the insurance company would be under no obligation to defend the actions, nor to pay any judgment that might be recovered. General Casualty & Surety Co. v. Kierstead, 8 Cir., 67 F.2d 523; Ohio Casualty Co. v. Swan, 8 Cir., 89 F.2d 719; Coleman v. New Amsterdam Casualty Co., 247 N.Y. 271, 160 N.E. 367, 72 A.L.R. 1443.

It is a condition precedent to the right of recovery under this policy, that the insured shall "actively cooperate with the Company" in the defense of damage actions. It has been held that cooperation, in the sense used in such policies, requires that the insured should make a fair and frank disclosure of information reasonably demanded by the insurer, to determine whether there is a genuine defense. Ohio Casualty Co. v. Swan, supra. The contract here requires that the insured "actively cooperate," and in that regard this requirement is at least more emphatic and definite than a policy simply requiring that the insured "cooperate."

It is urged that we are bound in this case by the findings of the lower court on these issues. Rule 52(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, is as follows: "In all actions tried upon the facts without a jury, the court shall find the facts specially and state separately its conclusions of law thereon and direct the entry of the appropriate judgment; and in granting or refusing interlocutory injunctions the court shall similarly set forth the findings of fact and conclusions of law which constitute the grounds of its action. Requests for findings are not necessary for purposes of review. Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses. The findings of a master, to the extent that the court adopts them, shall be considered as the findings of the court."

The rule plainly contemplates a review by the appellate court of the sufficiency of the evidence to sustain the findings. If this were not true, the provision that requests for findings are not necessary "for the purpose of review" would be meaningless. If the findings are clearly erroneous, the appellate court should set them aside, always giving due regard to the fact that the trial court had the opportunity of observing the witnesses. In Simkins Federal Practice, 3d Ed., page 488, in commenting on the effect of Rule 52(a), it is said:

"The new practice, now incorporated in the Civil Procedure Rules, accords with the decisions on the scope of the review in modern Federal equity practice, and applies to all cases tried without a jury, whether legal or equitable in character, and whether the finding is of a fact concerning which the testimony was conflicting or of a fact inferred from uncontradicted testimony.

"Under the new practice, where findings are made by the court without a jury, the appellate court is not limited to the mere question whether there is any substantial evidence to support them, but may set them aside if against the clear weight of the evidence, at the same time giving full effect to the special qualification of the trial judge to pass on credibility."

The rule with reference to review of findings of fact in equity cases has often been announced by this court. Johnson v. Umsted, 8 Cir., 64 F.2d 316; Koenig v. Oswald, 8 Cir., 82 F.2d 85; Lambert Lbr. Co. v. Jones Engineering & Constr. Co., 8 Cir., 47 F.2d 74; Chicago, M., St. P. & P. R. Co. v. Flanders, 8 Cir., 56 F.2d 114; First National Bank v. Andresen, 8 Cir., 57 F.2d 17; United States v. Perry, 8 Cir., 55 F.2d 819. In Koenig v. Oswald, supra, we reversed the findings of the lower court in a fraud case because they were deemed to be contrary to the weight of the evidence, even though they were sustained by the spoken word from the witness stand. While the findings of fact are presumptively correct, they are not conclusive on appeal, if against the clear weight of the evidence. In Keller v. Potomac Electric Co., 261 U.S. 428, 43 S.Ct. 445, 449, 67 L.Ed. 731, the Supreme Court, in discussing procedure in an equity case, said: "In that procedure, an appeal brings up the whole record and the appellate court is authorized to review the evidence and make such order or decree as the court of first instance ought to have made, giving proper weight to the findings on disputed issues of fact which should be accorded to a tribunal which heard the witnesses."

The Supreme Court of Nebraska, in Re O'Connor's Estate, 105 Neb. 88, 179 N.W. 401, 12 A.L.R. 199, reversed the decision of the lower court, which admitted a will to probate after finding it genuine, on the ground that the testimony of the subscribing witnesses in support of the will was not credible although their positive testimony to the due execution was opposed only by oral evidence and evidence of a circumstantial character.

The facts largely relied upon in this case consist of testimony and written statements given or made by the defendants not in the presence of the lower court but in the course of the trial of the damage actions in the state court. The lower court, as to such evidence, had no better opportunity of judging the credibility of the witnesses than does the appellate court.

In considering the evidence, it is well to bear in mind that under the statute of Nebraska referred to as the Guest Statute, it is incumbent upon the...