Case Title: Nationwide Mutual Fire Ins. Co. v. Rezainik

Citation: 

Docket Number: 990052

State: virginia

Court: Virginia Supreme Court

Date: 1999-11-05T00:00:00Z

Document:
Present:  All the Justices 
 
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY 
 
v.  Record No. 990052     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
November 5, 1999 
MINOO F. REZAINIK 
 
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH 
Philip L. Russo, Judge 
 
Minoo F. Rezainik filed a motion for judgment against  
Nationwide Mutual Fire Insurance Company (Nationwide), her 
homeowners' insurance carrier, when it denied her claim for 
losses she sustained when her luggage and its contents were 
damaged or lost during her return trip from Iran to the United 
States.  A jury returned a verdict in favor of Rezainik and 
the trial court entered judgment confirming the verdict.  
Because we conclude that the trial court did not err in 
determining that the damaged or lost goods qualified for an 
exemption from federal law prohibiting importation of goods of 
Iranian origin, we will affirm the judgment of the trial 
court. 
 Rezainik and her brother traveled to Iran in July 1995 to 
bring their parents, Iranian citizens, back to the United 
States, so that they could become permanent residents and 
obtain medical treatment.  Rezainik took $20,000 in United 
States currency to Iran to cover expenses which she might 
incur on the trip.  While in Iran, Rezainik bought a number of 
Iranian goods such as rugs, cologne, frames, jewelry, leather 
goods, and other personal property.  The goods were purchased 
with the money she took to Iran and approximately $60,000 she 
had sent to her mother in Iran over the preceding 25 years.  
Rezainik asserted that the goods she purchased had a combined 
value of approximately $80,000.  Prior to leaving Iran, 
Rezainik packed the purchased items in nine suitcases, each 
secured with a lock and wrapped with ropes.  The suitcases 
were checked with the airline carrier for transport to 
Washington, D.C. 
When Rezainik and her family arrived in Washington, D.C., 
only three of the nine suitcases were recovered.  All three 
suitcases were torn and their contents were damaged or 
missing.  The remaining six suitcases, recovered by the 
airline a few days later, were also torn and their contents 
damaged or missing.  Rezainik filed damage report forms with 
the airline.  
Rezainik notified Nationwide of her loss.  A Nationwide 
adjuster inspected the suitcases.  Rezainik filled out 
Nationwide's Contents Loss Inventory form based on the copies 
of the receipts she had received from the merchants in Iran 
from whom she purchased the goods.  Nationwide denied 
Rezainik's claim for a number of reasons including alleged 
lack of timely filing of the claim, misrepresentation of 
 
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material facts, and inclusion of items not covered under the 
policy. 
Rezainik filed an action against Nationwide seeking a 
determination that her claim was covered under the policy.  
She sought recovery of $56,000 plus attorneys' fees and costs.  
Nationwide filed grounds of defense asserting, inter alia, 
that "requiring coverage under this purported contract of 
insurance would violate the strong public policy of the 
Commonwealth of Virginia because the activity underlying the 
alleged loss was in violation of the laws of the United 
States" prohibiting the importation of Iranian-origin goods 
into the United States. 
Prior to trial, the trial court sustained Rezainik's 
motion in limine precluding Nationwide from referring to or 
relying on the federal ban on importation of Iranian-origin 
goods.  The trial court held that, as a matter of law, the 
goods Rezainik purchased in Iran and brought into the United 
States were exempt from the prohibition against importation of 
Iranian-origin goods under an exception for "transactions 
ordinarily incident to travel to or from any country, 
including importation of accompanied baggage for personal 
use."  31 C.F.R. § 560.210(d). 
Following Rezainik's testimony at trial, Nationwide again 
asserted that the goods at issue did not qualify for the 
 
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exemption, but the trial court declined to alter its prior 
ruling.  The jury returned a verdict in favor of Rezainik in 
the amount of $17,305 and the trial court entered judgment on 
that verdict.  Nationwide appealed, assigning error to the 
trial court's holding that the goods at issue were personal 
goods incident to travel and therefore exempt from the 
prohibition against the importation of Iranian-origin goods.*
Executive Order 12959, effective May 6, 1995, prohibits 
"the importation into the United States . . . of any goods or 
services of Iranian origin, other than . . . publications."  
Exec. Order No. 12959, 60 Fed. Reg. 24757 (1995).  Regulations 
promulgated pursuant to this Order include 31 C.F.R. § 560.210 
that identifies certain transactions which are exempt from the 
prohibition.  Subsection (d) of that section states: 
Travel.  The prohibitions contained in this 
part do not apply to transactions ordinarily 
incident to travel to or from any country, including 
importation of accompanied baggage for personal use 
. . . . 
 
31 C.F.R. § 560.210(d) (1998).  The trial court concluded that 
the Iranian-origin goods Rezainik brought into the United 
                     
* Nationwide also argued on brief that the trial court 
should have submitted the issue to the jury.  However, as 
Nationwide agreed at oral argument, the trial court was never 
asked to submit the issue to the jury and, therefore, we will 
not consider this argument raised for the first time on 
appeal.  Rule 5:25. 
 
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States qualified for exemption from the importation 
prohibition under this provision. 
Nationwide asserts that this exemption is not applicable 
because it is "absurd on its face" to claim that bringing 
$80,000 worth of goods could be incident to travel and that 
the "sheer volume" of goods shows that all the claimed goods 
could not have been for personal use.  Nationwide also asserts 
that Rezainik's testimony shows that the goods were not 
brought into the United States for Rezainik's personal use.  
Rezainik stated that she purchased the goods for gifts and for 
"education – you know, my kids' education money in the future, 
they don't like to keep it, they need money, they can sell 
it."  This testimony, Nationwide urges, shows that Rezainik 
did not purchase the goods for her personal use and they were 
not "incident to travel;" rather, according to Nationwide, 
Rezainik purchased the goods for others and she intended that 
at least some of the goods would be sold.  We disagree with 
both of Nationwide's contentions. 
Nothing in Executive Order 12959 or the regulations sets 
a limit on the number or value of items which are entitled to 
the exemption.  The exemption applies to a class of property 
rather than an amount or value of imported property.  A review 
of the regulations implementing Executive Order 12959 
indicates that the prohibition is not directed at that class 
 
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of Iranian-origin goods intended for personal use; rather the 
prohibition is directed at preventing transactions which 
introduce such goods and services into the stream of trade and 
commerce.  See United States v. Ehsan, 163 F.3d 855, 858 (4th 
Cir. 1998)(explaining that term "export" in Executive Order 
12959 relates to shipment of goods to a country to "join those 
goods with the commerce of that country").  Thus, a 
determination that goods brought into this country in baggage 
accompanying a traveler were for personal use is not dependent 
on the number or value of such goods.  
Rezainik's testimony that the goods were gifts or were 
for her children's education and might eventually be sold does 
not transform them into goods which would be introduced into 
the stream of commerce.  Nor do we construe the phrase 
"personal use" so narrowly as to exclude uses intended to 
benefit members of Rezainik's family.  Considering Rezainik's 
testimony in light of our reading of the regulations, we 
conclude that the trial court did not err in holding that 
Rezainik's testimony did not require it to alter its previous 
determination that the exemption set out in 31 C.F.R. 
§ 560.210 applied to the goods at issue. 
Finally, Nationwide asserts that 31 C.F.R. §§ 560.506 and 
560.507 of the regulations implementing the Executive Order 
require a different result.  Again we disagree.  The first 
 
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regulation, 31 C.F.R. § 560.506, limits the value of imported 
Iranian-origin goods to $100 when such goods are sent as gifts 
to persons in the United States.  The next regulation, 31 
C.F.R. § 560.507, defines "accompanied baggage" as that 
"necessary for personal use incident to travel, not intended 
for any other person or for sale."  Both sections appear in 
Subpart E of the regulations which addresses "Licenses, 
Authorizations and Statements of Licensing Policy."  These 
sections do not address "exemptions" from the prohibition 
pursuant to 31 C.F.R. § 560.210 and are not definitions of 
terms used in that section.  These sections address 
circumstances under which persons are specifically authorized 
to "import" Iranian-origin goods into the United States.  
These sections are consistent with the conclusion that the 
prohibition is directed to the importation of goods intended 
for introduction into the stream of commerce, and is not 
applicable to goods intended for personal use.  Furthermore, 
the limitation of 31 C.F.R. § 560.506 does not apply to this 
case because no goods were sent as gifts.  Therefore, the 
trial court's determination that the goods at issue were 
brought into this country for personal use is not inconsistent 
with these sections. 
In summary, the record in this case supports the 
conclusion that the Iranian-origin goods Rezainik brought to 
 
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the United States were for personal use, and the trial court 
did not err in holding that they were exempt from the 
prohibition of importation of Iranian-origin goods into the 
United States under 31 C.F.R. § 560.210.  Accordingly, we will 
affirm the judgment of the trial court. 
Affirmed.
 
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