Indianapolis Life Insurance v. Herman , 204 F. App'x 908 ( 2006 )

Not For Publication in West's Federal Reporter
Citation Limited Pursuant to 1st Cir. Loc. R. 32.3
United States Court of Appeals
For the First Circuit
No. 06-1722
INDIANAPOLIS LIFE INSURANCE COMPANY,
Plaintiff, Appellee,
v.
ROSALIND HERMAN, TRUSTEE, FINANCIAL RESOURCES NETWORK, INC.
PROFIT SHARING PLAN AND TRUST, FINANCIAL RESOURCES
NETWORK, INC. PROFIT SHARING PLAN TRUST, AND
GREGG D. CAPLITZ,
Defendants, Appellants,
RUDY K. MEISELMAN, M.D. AND HOPE MEISELMAN,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Lipez, Circuit Judge,
Stahl, Senior Circuit Judge,
and Howard, Circuit Judge.
Wayne R. Murphy with whom Murphy & Associates was on brief,
for appellants.
Charles P. Kazarian, P.C. with whom Law Office of Charles P.
Kazarian was on brief for appellee, Rudy K. Meiselman, M.D.
William T. Bogaert with whom Michele Carlucci and Wilson,
Elser, Moskowitz, Edelman & Dicker LLP were on brief for appellee,
Indianapolis Life Insurance Company.
November 9, 2006
Per Curiam. Indianapolis Life Insurance Co. brought a
diversity action against Rosalind Herman, in her capacity as
trustee of Financial Resources Network, Inc. Profit Sharing Plan
and Trust, Financial Resources Network, Inc. Profit Sharing Plan
and Trust, Gregg D. Caplitz (collectively the FRN defendants), and
Rudy and Hope Meiselman seeking a declaratory judgment that it
properly rescinded a "second to die" policy that it had issued on
the lives of the Meiselmans. Indianapolis Life also brought a
breach of contract action against Caplitz to recover a commission
it paid him on the rescinded policy. The Meiselmans also brought
a cross-claim against the FRN defendants stemming from a soured
employment relationship between Rudy Meiselman and Financial
Resources Network.
The district court granted Indianapolis Life summary
judgment, ruling that, because the defendants had made an
intentional misrepresentation in applying for the policy,
Indianapolis Life had properly rescinded it and was entitled to a
return of the commission. The court also entered a default
judgment against the FRN defendants on the cross-claim, which was
never answered. The FRN defendants appeal, arguing that disputed
issues of material fact should have precluded the entry of summary
judgment for Indianapolis Life, and that the district court should
have granted their motion to set aside the default judgment.
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Because we write primarily for the benefit of the
parties, we omit a recitation of the background and proceed
directly to the merits of the district court's rulings. We begin
by considering de novo the grant of summary judgment in favor of
Indianapolis Life. See Fraidowitz v. Mass. Mut. Life Ins. Co., 443
F.3d 128, 131 (1st Cir. 2006). Under Massachusetts law, an insurer
may rescind an insurance policy by showing that the insured made a
misrepresentation in the negotiation of the policy "with [the]
actual intent to deceive" the insurer, or that the
misrepresentation "increased [the insurer's] risk of loss." Mass.
Gen. Laws ch. 175, § 86. Rescission is permissible if the insurer
establishes either an actual intent to deceive or an increased risk
of loss. See Boston Mut. Life Ins. Co. v. N.Y. Islanders Hockey
Club, 165 F.3d 93, 96 (1st Cir. 1999).
It is undisputed that Indianapolis Life required the
defendants to submit a statement of the Meiselmans' financial
condition prepared by a certified public accountant (CPA) as part
of the underwriting process. Caplitz provided Indianapolis Life
with an income verification statement for the Meiselmans purporting
to be from CPA James Goodness. At Caplitz's request, the
verification statement was in fact prepared by James Goodness' son,
Daniel, who was not a CPA. Caplitz asked Daniel Goodness to place
the verification statement on his father's stationery and to sign
his father's name so that it would appear to have been prepared by
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a CPA. There is thus no dispute that Caplitz acted with the intent
to deceive Indianapolis Life by submitting an income verification
statement for the Meiselmans, which he intentionally misrepresented
to have been prepared by a CPA.
The FRN defendants contend that these undisputed facts do
not warrant the entry of summary judgment because Indianapolis Life
has not submitted undisputed evidence that Caplitz's intentional
misrepresentation increased Indianapolis Life's risk of loss. They
are mistaken. Because the evidence establishes that Caplitz made
this misrepresentation with the actual intent to deceive,
Indianapolis Life was not required to show that the
misrepresentation increased its risk of loss. See Boston Mut.
Life, 165 F.3d at 99. Accordingly, Indianapolis Life was properly
awarded summary judgment.1
We turn now to the district court's ruling denying the
FRN defendants' Fed. R. Civ. P. 60(b) motion for relief from the
default judgment. We review the denial of a Rule 60(b) motion for
an abuse of discretion. See Blanchard v. Cortes-Molina, 453 F.3d
40, 44 (1st Cir. 2006).
1
At oral argument, the FRN defendants suggested that summary
judgment should have been denied because Indianapolis Life did not
identify the false income verification submission as the basis for
rescission in its letter informing the defendants of the recision
decision. This argument was not raised in the FRN defendants'
initial brief and is therefore forfeit. See Rumierz v. Gonzales,
456 F.3d 31, 47 (1st Cir. 2006).
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The FRN defendants' main argument is that the judgment in
favor of the Meiselmans is void. See Fed. R. Civ. P. 60(b)(4).
They argue that the judgment is void because the subject matter of
the Meiselmans' cross-claim is identical to a prior litigation
between the same parties and therefore barred as res judicata.
This argument misconstrues "a void judgment" under Rule
60(b)(4). The "concept of void judgments is narrowly construed."
United States v. Boch Oldsmobile, Inc., 909 F.2d 657, 661 (1st Cir.
1990). A judgment is void, and therefore subject to being set
aside under Rule 60(b)(4), only if the court lacked jurisdiction or
committed a plain usurpation of power constituting a violation of
due process. See Hoult v. Hoult, 57 F.3d 1, 6 (1st Cir. 1995). "A
judgment is not void simply because it is or may have been
erroneous; it is void only if, from its inception, it was a legal
nullity." Id.Res judicata is an affirmative defense that is usually
deemed forfeit if not raised in the answer. See Davignon v.
Clemmey, 322 F.3d 1, 15 (1st Cir. 2003) (citing Fed. R. Civ. P.
8(c)). It is not a limitation on the court's jurisdiction.
Cf. Scherer v. Equitable Life Assurance Society of the United
States, 347 F.3d 394, 98 n.4 (2d Cir. 2003) (stating that, unlike
jurisdictional defects, a court is not required to apply res
judicata sua sponte). Accordingly, that res judicata may have been
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an available defense does not render the judgment void under Rule
60(b)(4).
The FRN defendants also argue that relief from judgment
should have been granted under Rule 60(b)(1) because their failure
to answer the Meiselmans' cross-claim resulted from excusable
neglect. The FRN defendants have submitted an affidavit from their
attorney providing several excuses for having failed to file an
answer. Counsel claims that he was confused as to whether he had
filed the answer and was distracted by a family health problem.
But counsel acknowledges that despite receiving several
notifications from opposing counsel and the court that no answer
had been filed, he still did not take responsive action. In these
circumstances, the district court did not abuse its discretion in
concluding that the FRN defendants had failed to establish
excusable neglect. See Stonkus v. City of Brockton Sch. Dep't, 322
F.3d 97, 100-01 (1st Cir. 2003) (holding that excusable neglect was
not established where counsel claimed that he was confused over the
correct filing deadline and was busy with other matters).
Affirmed.
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