349 F.2d 228 | D.C. Cir. | 1965
Lead Opinion
Appellee Pennsylvania General Insurance Company sought a declaratory judg
After expiration of the grace period but prior to appellee’s receipt of the insured’s renewal application, the insured’s automobile was involved in an accident in which serious personal injuries were sustained. The Company initially undertook defense of the lawsuit arising out of the accident, but only after first notifying the insured that it was acting without prejudice to a later denial of coverage. Approximately a year before the lawsuit came to trial, the Company withdrew and instituted this suit. Despite appellants’ timely demand for a jury trial, the court heard this case without a jury and held for the Company. The court found that the insured had pre-dated his premium check for the purpose of deceiving appellee into treating the renewal application as if it had been mailed during the grace period, when in fact it had not.
On this appeal we reject appellants’ contentions that they proved a valid renewal of the insured’s policy as a matter of law, and alternatively that the Company waived any right to object to the renewal’s validity.
But there is possible merit in appellants’ claim that they were erroneously deprived of a jury trial. In providing for declaratory judgments, Congress left unaffected the right to jury trial. Rule 57, Fed.R.Civ.P.; American Lumberman’s Mut. Casualty Co. of Illinois v. Timms & Howard, Inc., 108 F.2d 497 (2d Cir. 1939). The right to jury trial in a declaratory judgment action depends, therefore, on whether the action is simply the counterpart of a suit in equity — that is, whether an action in equity could be maintained if declaratory judgment were unavailable — or whether the action is merely an inverted lawsuit. See Pacific Indemnity Co. v. McDonald, 107 F.2d 446 (9th Cir. 1939); James, Right to a Jury Trial in Civil Actions, 72 Yale L.J. 655, 685-86 (1963); Borchard, Declaratory Judgments 400 n. 63 (1941).
The issue tendered by appellee’s complaint was fraud in the procurement of the insured’s renewed policy.
When the Company initiated this suit, the loss under the policy had not been established, but an action was then pending in which the loss was subsequently established. The adequacy of the Company’s legal remedy depends upon the nature of its proof of fraud. For example, it has been held that an insurer in these circumstances could maintain an equitable action for recision where its claim of fraud rested on the testimony of witnesses not generally available to it and who might have disappeared before a legal action on the policy could or would be instituted. Massachusetts Bonding & Ins. Co. v. Anderegg, swpra
Although the foregoing factors suggest that the Company’s legal remedy was adequate, and consequently that appellants’ demand for a jury trial should have been honored, the parties have never had an opportunity to address themselves to the adequacy of appellee’s legal remedy, since the trial judge denied a jury trial without inquiring into that issue. We think that such an opportunity should be afforded now. Factors not presently appearing in the record may exist which demonstrate that delay in adjudicating the fraud issue likely would have prejudiced appellee’s case seriously.
So ordered.
. Appellants’ waiver argument is based on the trial court’s finding that appellee’s agent was notified of the accident prior to the receipt of the insured’s renewal application. Since the trial court held held that by falsely pre-dating his check, the insured intentionally induced appellee to consider his renewal application as if made within the grace period, it is irrelevant whether appellee had imputed knowledge of the accident at the time it struck the “lapsed” notation from insured’s policy. See generally 3 Pomekoy, Equity Jurisprudence § 876 et seq. (5th ed. 1941). Appellants might argue that in view of the Company’s imputed knowledge of the intervening accident, it was not justified in relying on the veracity of the date on the insured’s check without first having conducted an independent investigation. See id. at § 891. Appellants have not made that argument in either court, however, and we are not inclined to consider it initially at this time.
. The trial court’s memorandum opinion indicates it considered the issue to be one of acceptance of the insured’s offer to renew his policy. The trial court apparently reasoned that because the insured intentionally deceived the Company into
. “The rule is generally adopted that a suit will not be sustained to cancel an executory, non-negotiable, personal contract, — for example, a policy of insurance,11 — when the fraud might be set up as a defense to an action on the contract, and there are no special circumstances which would prevent the defense from being available, adequate, and complete. * * * On the other hand jurisdiction has been exercised to cancel instruments, although not negotiable, where delay and other circum-stanees might ultimately hinder a defense in an action at law. For instance, a right to maintain a suit in equity often arises from the fact that a defense at law in an action on an insurance policy may be lost to the insurer because of uncertainty as to the time when loss may occur, the danger that witnesses may disappear, or because the policy may become incontestable after a limited period unless such a suit is begun by the insurer.” 3 Pomeroy, Equity Jurisprudence § 914a, at- 590-92 (1941).
Compare American Life Ins. Co. v. Stewart, 300 U.S. 203, 57 S.Ct. 377, 81 L.Ed. 605 (1937), with Prudential Ins. Co. of America v. Saxe, 77 U.S.App.D.C. 144, 134 F.2d 16 (1943).
. We think State Farm Mutual Auto Ins. Co. v. Mossey, 195 F.2d 56 (7th Cir.) cert. denied, 344 U.S. 869, 73 S.Ct. 109, 97 L.Ed. 674 (1952), upon which the Company relies, is unsound to the extent that it may be-read to uphold denial of a jury trial wherever no loss under the insurance policy has been sustained. The court there upheld denial of a jury trial, although the insurer’s claim of fraud was based entirely on documentary proof. Not only is that view inconsistent with past cases, but it would tend to induce insureds to compromise damage claims unfavorably in order to win the proverbial “race to the courthouse door.”
. Since equity’s jurisdiction was determined at common law as of the time an action was filed, the fact that the insured had already sustained a loss on the policy by the time this case was called for trial is irrelevant to the determination of the adequacy of the Company’s legal remedy. American Life Ins. Co. v. Stewart, 300 U.S. 203, 215, 57 S.Ct. 377 (1937).
If prior to trial in this case appellants had filed a counterclaim for damages under the policy- — as they could have done once the judgment against the insured became final — perhaps they would have been entitled to a jury trial on the fraud issue, which would then have been common to both claims. See Beacon The-atres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959) ; Dairy Queen Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962). We need not consider the issue, however, since no such counterclaim was filed.
. We must reject the suggestion that a judgment n.o.v. would have been required on this record, had a jury found for appellants, since the principal issue for the jury would have been appellants’ credibility.
Dissenting Opinion
(dissenting) :
The appellee had issued to Donald E. Reeves an automobile liability policy for a period of six months from January 14, 1960 to July 14, 1960. On August 18, 1960, one Marie Alma James, while driving the Reeves car, was involved in an accident in which one Mary Dona was injured. The latter sued Reeves and James alleging negligence. Appellant on October 17, 1961 instituted an action seeking a declaratory judgment which, after full trial before a District Judge sitting without a jury, resulted in an order that the appellee “is not liable to the Defendant Reeves on account of the claims of the Defendants James and Dona based upon an accident which occurred on August 18, 1960”; and further, that the appellee “is not liable to the Defendant Reeves on account of any claim or claims” which occurred after the termination of the policy on or about July 14, 1960.
Reeves and James in their answers had demanded a trial by jury. When the case was called on December 4, 1963, counsel for Reeves and James informed the judge:
“It was just called to my attention late yesterday afternoon that Your Honor is sitting without a jury in this matter.
“The Court: This case has been on the non-fury calendar since the time it was filed. When was the demand for jury trial filed?
“Mr. Hillman: With the filing of the answer, Your Honor [which had been filed November 13, 1961].” (Emphasis added.)
The trial judge ruled that the relief herein sought was equitable
“The Court finds the testimony of the defendant Reeves that he mailed the cheek #2013 on July 16th absolutely untrue and a calculated falsehood. The Court further finds the testimony of the defendant Reeves as incredible and incredulous, insofar as it relates to his accounts with reference to this insurance policy and his contacts with the selling agent Sapourn.
“The Court finds in favor of the plaintiff [appellee] in this case. The Court finds that the policy had lapsed prior to the time that the defendant Reeves mailed a check in payment of the renewal premium. The Court finds as a matter of law that the reporting of the accident to a clerical employee of an insurance agent’s office in the District of Columbia more than a month after the lapsing of the policy did not, by the acceptance of that report, revive or reinstate the insurance policy. The Court finds that the mailing by the defendant Reeves of a falsely-dated check in the latter part of August and the acceptance of that check by Philadelphia clerical employees of the plaintiff company without knowledge of the accident did not revive or reinstate the policy. The Court finds that the action of the plaintiff in returning a check in the amount of defendant Reeves’ mis-dated check to their Washington attorneys for delivery to the defendant Reeves as soon as the plaintiff company had full knowledge of the facts in this situation was a valid and proper rejection of the defendant’s attempted fraudulent renewal of the policy. The Court finds that under the circumstances of this case the plaintiff is entitled to judgment declaring its non-liability under the policy issued on January 14, 1960, which policy the Court finds was never renewed by the plaintiff.”
Reeves had so dated his check as to represent to the company that on that date he had signed and mailed a check in the amount of the premium, as the trier found. Actually, the check had been falsely dated and transmitted by Reeves, knowingly, willfully and after the 20-day grace period had expired. He had returned with the falsely dated check, the renewal notice which the company had sent to him. Seldom do we see a more palpable effort to perpetrate fraud.
Granting that the opinion otherwise discursively touches upon points stressed by opposing counsel before the judge, it is equally obvious from this record that the carrier rescinded and disavowed upon learning of the fraud which had been practiced upon it. This was not a case where the carrier was bound to sit back and await a possible action on the policy by the insured after the injured passenger, Mary Dona, at some future date might have secured a judgment in her negligence action. Here no loss had been established and no counterclaim
Here there was not only substantial evidence of actual fraud, as the trial judge found, but the Reeves testimony to the contrary was described as “incredible.” The judge specifically noted that the Reeves testimony that the alleged renewal check had been mailed on July 16, was “absolutely untrue and a calculated falsehood.” Overwhelmingly the appellee had sustained its burden of proof
On the one hand the appellants tendered the argument that the policy had never been cancelled, and at the same time if cancelled, that it had been reinstated. They contended that the insurer was bound to defend both Reeves and James.
In those circumstances there was open to the insurer no adequate remedy at law if indeed the policy had been procured by fraud. The Company’s recourse to equity was proper for no loss had occurred in that liability had not been established against the insured.
The insurer thus was entitled to be relieved of uncertainty as to whether or when a loss might later occur; as to the possibility that witnesses and evidence essential to its proof of fraud might disappear; as to the obligation asserted against it involving the expense of investigation and defense of a suit and the maintenance of a reserve against the contingency of recovery.
The trial court correctly discerned that equitable considerations required the declaratory judgment that no liability inured in a contract properly cancelled for fraud. I would affirm.
. Fed.R.Civ.P. 38 preserves the right of trial by jury, but only with respect to “any issue triable of right by a jury.” Fed.R.Civ.P. 39 provides that when a jury demand shall have been filed, the trial shall be by jury unless the parties waive or unless “the court upon motion or of
. State Farm Mut. Auto. Ins. Co. v. Mossey, 195 F.2d 56, 59 (7 Cir.), cert. denied, 344 U.S. 869, 73 S.Ct. 109 (1952).
. Discernible from the court’s opinion are findings of the six essential elements giving rise to a claim for misrepresentation. Pomeroy, Equity Jurisprudence § 876 (5th ed. 1941).
. Cf. Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 243, 57 S.Ct. 461, 81 L.Ed. 617 (1937). See 6 Moore, Federal Practice If 57.19, at 3109-3110 (2d ed. 1953).
. 6 Mooee, Federal Pbactice If 57.31 (2d ed. 1953).
. Even if there had been a trial to a jury with a verdict for James, in the light of the findings and on the record before us, the trial judge would have been bound to grant a judgment for the insurer, n.o.v. Cf. Pittman v. West American Insurance Company, 299 F.2d 405, 409 (8 Cir. 1962).
. Cf. Zipperer v. State Farm Mut. Auto. Ins. Co., 254 F.2d 853, 856 (5 Cir. 1958).
. In Beacon Theatres v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959)., a separate trial of issues under Rule 42(b) or Rule 57 was deemed improper where it might deprive the defendant of a jury trial of issues which had been established in the counterclaim.
. As was observed by Mr. Justice Cardozo, writing for a unanimous Court:
“Here the insurer had no remedy at law at all except at the pleasure of an adversary. There was neither equality in efficiency nor equality in certainty nor equality in promptness. ‘The remedy at law cannot be adequate if its adequacy depends upon the will of the opposing party.’ [Citations omitted.]” Amer. Life Ins. Co. v. Stewart, 300 U.S. 203, 215, 57 S.Ct. 377, 380, 81 L.Ed. 605 (1937).
. Massachusetts Bonding & Ins. Co. v. Anderegg, 83 F.2d 622, 624, 625 (9 Cir. 1936).
. Id. at 625; State Farm Mut. Auto. Ins. Co. v. Mossey, supra note 2.
