Ronald Gidden v. State Farm Fire & ( 1996 )


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  •                                     ___________
    No. 96-1082
    ___________
    Ronald Gidden,                          *
    *
    Plaintiff-Appellant,      *
    *    Appeal from the United States
    v.                                 *    District Court for the
    *    Eastern District of Missouri.
    State Farm Fire & Casualty              *
    Company,                                *           [UNPUBLISHED]
    *
    Defendant-Appellee.       *
    ___________
    Submitted:     September 11, 1996
    Filed:    October 11, 1996
    ___________
    Before MAGILL, FLOYD R. GIBSON, and LAY, Circuit Judges.
    ___________
    PER CURIAM.
    Ron Gidden initiated this action to recover on his homeowners
    insurance policy, issued by State Farm Fire & Casualty Company ("State
    Farm"), when State Farm refused to compensate Gidden after a July 1993 fire
    destroyed his home.      State Farm filed a counterclaim seeking a money
    judgment against Gidden for the balance due on two promissory notes
    assigned to State Farm.
    A jury returned a verdict in favor of State Farm both as to Gidden's
    claims and State Farm's counterclaim.       The court1 entered judgment in State
    Farm's favor pursuant to the jury verdict and denied Gidden's subsequent
    new trial motion.    Gidden appeals,
    1
    The Honorable David D. Noce, United States Magistrate Judge
    for the Eastern District of Missouri, tried the case by consent of
    the parties under 28 U.S.C. § 636(c)(3).
    challenging certain jury instructions and special interrogatories, and the
    court's allowance of the hearsay testimony of Michael Walton.     We affirm.
    FACTS
    Before 1990, various fires occurred on the property of Ron Gidden,
    including a June 1989 arson fire that destroyed Gidden's house.       After
    rebuilding, Gidden had applied for but was denied homeowners insurance by
    several companies.   One insurance company noted the 1989 arson fire as the
    reason it rejected Gidden's insurance application.   Gidden then applied to
    State Farm for insurance, but did not disclose the 1989 fire in his
    application.    State Farm insured Gidden's home.
    In 1991 or 1992 Gidden brought an insurance claim under the policy
    for storm damage to his home.    State Farm paid the claim.
    In February 1993, Ron Gidden's brother, Rick Gidden, along with
    Rick's family, moved into Ron's home.     In July 1993, fire destroyed Ron's
    home once again.   At the time of the 1993 fire, nine people were living in
    the house; including, among others, Ron and his brother Rick's family.
    Rick also kept his pet parrot in the house.
    State Farm refused to cover the loss.   Ron sued in state court and
    State Farm timely removed the action to federal district court.   It claimed
    no duty to pay on the policy because (1) the fire was intentionally set by
    or at the direction of Ron, (2) an insured misrepresented or concealed
    material facts after the fire, and (3) Ron made material misrepresentations
    when he applied for the
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    policy.2
    At trial, the jury heard undisputed evidence that the 1993 fire
    resulted from arson.     The jury also learned of the prior fires on the
    property, including the June 1989 arson fire that destroyed Ron's house but
    which Ron had failed to disclose to State Farm.    The jury heard evidence
    that Ron had received $108,500 on his insurance claim following the 1989
    fire, rebuilt the new house for $61,000, and then claimed a $267,000 loss
    after the 1993 fire.   State Farm also presented evidence that Ron acquired
    a second mortgage on the house seven months before the 1993 fire, and that
    Ron's monthly household income was $2400 at the time of the fire while his
    monthly expenses were over $3700.    State Farm established that it would
    have rejected Ron's application had Ron properly reported the June 1989
    arson fire.3
    Evidence was also adduced that Rick and Ron had lived together
    several times as adults; that Rick helped Ron pay for the property; that
    Rick and his family had been living in the house for over a five-month
    period before the fire; that Rick and his wife were unemployed when they
    moved in; that Ron told the fire marshal that
    2
    State Farm also filed a counterclaim seeking a judgment
    against Ron for the balance due on two promissory notes and deeds
    of trust assigned to State Farm by two of Ron’s creditors.
    3
    The evidence showed that all nine occupants were away from
    the house the night of the 1993 fire.      Rick and his wife were
    camping the weekend of the fire, and had taken their pet parrot
    with them. Rick testified that the parrot would not eat if left in
    the house, but the jury learned that Rick had recently left the
    bird alone in the house over the three-day 4th of July weekend.
    Ron sent his two daughters to his former wife's house for the
    weekend. Packed in their suitcases were keepsakes, including photo
    albums and their mother's death certificate. The jury learned that
    Ron later asked his former wife not to disclose that she had seen
    these items in the suitcases. Evidence was also adduced that after
    the fire one of Ron's former wives entered a shed behind the house
    and found a box, previously kept in the house, containing titles,
    insurance papers, birth certificates and school papers.
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    Rick's daughter was a permanent resident; that Rick's name had been on the
    property previously; and that Rick repeatedly referred to the property as
    "theirs."    Rick also claimed he owned the trailer behind the house and
    considered the occupants his tenants.
    INSTRUCTIONS
    Ron argues that Instruction No. 9 was not supported by the evidence
    and improperly defined "resident."4    We note at the outset that while Ron
    objected to Instruction No. 9 as not supported by substantial evidence, he
    did not otherwise object to the substance of the instruction and did not
    provide an alternative.   Trial Tr., vol. IV, at 6-8.    Where a party does
    not distinctly object to an instruction pursuant to Rule 51 of the Federal
    Rules of Civil Procedure, we review only for plain error.5    See Kostelec
    v. State Farm Fire & Casualty Co., 
    64 F.3d 1220
    , 1226-27 (8th Cir. 1995);
    Norton v. Carmark, Inc., 
    20 F.3d 330
    , 335-36 (8th Cir. 1994).
    The facts presented at trial support a finding that Rick was
    4
    Instruction No. 9 defines "resident of plaintiff's household"
    as
    one of the persons who live together as a family with the
    plaintiff in a closely knit group, whether or not related
    by blood, where the members of the group deal with each
    other informally and direct their attention and energies
    to achieving common goals and interests, and who intends
    to remain a member of plaintiff's household for an
    indefinite period of time . . . . A number of people can
    live together in one location and be members of separate
    households, and not of the same household, if their lives
    are substantially independent of one another or if their
    common abode is intended to be only a temporary
    arrangement.
    5
    An error is "plain" where it is obvious or otherwise
    seriously affects the fairness, integrity or public reputation of
    the judicial proceedings, or where the error almost surely affected
    the outcome of the case. Champagne v. United States, 
    40 F.3d 946
    ,
    947 (8th Cir. 1994).
    -4-
    a "resident" of Ron's household as defined by the instruction.                The policy
    defines "insured" as a "resident" but does not define "resident."                      The
    question of residence is a question of fact.            Countryside Casualty Co. v.
    McCormick, 
    722 S.W.2d 655
    , 658 (Mo. Ct. App. 1987).                  Under Missouri law,
    the district court properly submitted the issue of Rick's residency to the
    jury.    See 
    id. at 658-59
    (finding child was "resident" of her father's home
    where she visited regularly, had her own wardrobe, personal belongings and
    bedroom, and where they dealt with each other informally).                   We find the
    district court did not err in giving Instruction No. 9.
    Ron also challenges Jury Instruction No. 10.           That instruction lists
    State Farm's affirmative defenses, including Ron's intentional concealment
    of material information upon applying to State Farm for insurance.                      At
    trial, Ron objected to the instruction only on the basis that State Farm
    failed to present evidence to support it, and he offered no alternative
    instruction.       Trial   Tr.,   vol.   IV,   at   8-10.      Ron    now   contends   the
    instruction was erroneous because State Farm previously paid a loss to Ron
    for     storm   damage   and   because   the   policy    did    not     incorporate    the
    application.
    Given Ron's failure to preserve the issue now raised on appeal and
    the absence of any outcome-determinative error or error seriously affecting
    the fairness of the trial, Ron's argument fails.            See Champagne v. United
    States, 
    40 F.3d 946
    , 947 (8th Cir. 1994) (plain error standard).
    Ron also contests Instruction No. 11.           Instruction No. 11 advises
    that Ron cannot recover if State Farm proved that Ron, in applying to State
    Farm for insurance, intentionally concealed a coverable loss within three
    years prior to the application, without which concealment State Farm would
    not have issued the policy to Ron.        While Ron does not dispute that State
    Farm proved his application misrepresentation was false and material, he
    maintains
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    that the instruction is erroneous as it fails to contain every element of
    fraud.       We reject this contention.
    The policy here explicitly declares that State Farm "insure[s] [Ron
    Gidden] on the basis [his] statements are true."       (emphasis added).   The
    policy then expressly notes Ron's implicit representation: "that during the
    three years preceding the time of your application for this insurance . .
    . you and the members of your household have not had any insured losses,
    whether paid or not, that would have been covered under the terms of this
    or a similar policy."      Because the policy is expressly conditioned on the
    truth of Ron's application representations, State Farm needed to prove only
    that Ron's representations were false and material. Continental Casualty
    Co. v. Maxwell, 
    799 S.W.2d 882
    , 887-88 (Mo. Ct. App. 1990).     The court did
    not err for failure to include every element of fraud.
    INTERROGATORIES
    Ron argues that the jury's answer to Interrogatory 3, finding that
    neither Ron or Rick intentionally caused the fire, was inconsistent with
    its ultimate verdict in favor of State Farm.       This argument lacks merit.
    Here, the jury's findings are wholly consistent.     To determine which party
    would prevail required a finding as to each of State Farm's alternative
    affirmative defenses.       Contrary to Ron's assertion, a finding that State
    Farm did not prove Ron or Rick caused the fire does not preclude a finding
    that Rick was an insured or that Rick and Ron provided false material
    information to State Farm after the fire.6
    6
    Ron’s reliance on Depalma v. Bates County Mutual Ins., No.
    51293 (Mo. Ct. App. Mar. 19, 1996), as precluding denial of
    coverage to an innocent co-insured where another insured commits
    arson, is misplaced.     The Depalma court considered whether an
    innocent spouse may recover for a loss to property owned by the
    couple as tenants by the entirety where the property is
    intentionally destroyed by the other spouse and where the property
    is insured jointly. Here, the jury’s finding established that the
    actions of both Ron and Rick justified State Farm’s denial of
    coverage. Depalma is inapposite.
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    HEARSAY
    Rick was unavailable for trial.        The district court permitted hearsay
    evidence offered by Michael Walton, who formerly worked with Rick.              Walton
    testified that while he delivered a mobile home to Rick in 1987, Rick said
    to him, "I had a previous house that I made look like an electrical fire
    and . . . the insurance money I collected off that house is how I am able
    to buy this house."
    The district court permitted the hearsay testimony of Michael Walton
    after determining the testimony constituted a statement against Rick's
    penal interest under Rule 804(b)(3) of the Federal Rules of Evidence.                Ron
    argues that the district court committed reversible error by admitting the
    hearsay testimony.
    In United States v. Riley, 
    657 F.2d 1377
    (8th Cir. 1981), we adopted
    a three-prong test a movant must satisfy to overcome a hearsay objection
    and admit testimony as against a penal interest: the movant must show that
    (1) the declarant is unavailable as a witness, (2) the statement must so
    far tend to subject the declarant to criminal liability that a reasonable
    person in the declarant's position would not have made the statement unless
    he or she believed it to be true, and (3) corroborating circumstances
    clearly indicate the trustworthiness of the statement.              
    Id. at 1382-83.
    Here,    Walton        testified    that   Rick    admitted      he   previously
    intentionally set a fire and disguised it as an accidental electrical fire
    to   collect   under    an    insurance    policy.      State   Farm   points   to    no
    corroborating circumstance clearly indicating the
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    trustworthiness of Walton's statement.     Indeed, Walton is embroiled in a
    lawsuit against Rick in which Walton would benefit by a determination that
    Rick is an arsonist.   Instead of corroborating, the circumstantial context
    directly contradicts the trustworthiness of Walton's testimony, and State
    Farm points to no circumstance tending to support the statement.       State
    Farm fails to meet the third prong of the test.
    However, notwithstanding that Walton's hearsay testimony tends to
    show Rick set the fire, the jury found State Farm did not prove Rick set
    the fire.   Nor did the jury find that Ron set the fire.   Rule 103(a) of the
    Federal Rules of Evidence provides, "Error may not be predicated upon a
    ruling which admits or excludes evidence unless a substantial right of the
    party is affected."    The challenged evidentiary ruling fails to undermine
    the jury's determination that Ron concealed material information when he
    applied for insurance.    It also is irrelevant to the jury's finding that
    Ron and Rick provided false information to State Farm after the fire.
    Therefore, admission of the hearsay testimony, even if erroneous, did not
    affect a substantial right of Ron and provides no basis for reversal.
    In conclusion, we affirm the district court's judgment as to the
    denial of Gidden's claim and the money judgment entered as to State Farm's
    counterclaim.
    JUDGMENT AFFIRMED.
    A true copy.
    Attest:
    CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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