Court Opinion

ID: 9450974
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:01:55.5082+00
Date Added: 2024-06-11T17:32:30.674236
License: Public Domain

DANAHER, Circuit Judge
(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 equitable1 in nature and, of course, under Rule 57 he was au*233thorized to proceed with speedy hearing of an action for declaratory judgment. Jury trial was denied. It is for the court to say whether the action is legal or equitable.2 I think the trial judge here correctly perceived that the underlying issue was equitable in nature. In that context, and for further background, we may turn to the memorandum opinion of the trial judge. After a full trial he decided basically that the appellee was entitled to a judgment declaring that the insurer was not liable under the policy issued January 14, 1960. He predicated his ultimate judgment, he said, upon the factual situation developed at the trial “plus the Court’s evaluation of the credibility of the witnesses.” He wrote further:
“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.3
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 *234based thereon had been filed. Rather, when the appellee elected to rescind, the carrier’s rights here could be finally determined in a single equitable action, as was true prior to the adoption of the Declaratory Judgment Act. And certainly thereafter such a suit because of fraud, was permitted where the carrier proved it was entitled to rescind the contract.4 The insured was entitled to a judgment which fixed the rights and obligations of the parties to that contract.
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 proof5 ; indeed we have before us no slightest showing that the findings of the trial judge are clearly erroneous.6
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.7 In this case there was no counterclaim 8 presenting legal issues before the court. At the stage here reached and under the circumstances, the insurer was not bound, as respected authority demonstrates, to sit back, await the pleasure of the claimant, and then raise by way of defense pleading and proof, the very grounds upon which the policy was to be deemed void and of no effect.9 The insurer here had clearly established that its remedy at law would be ineffective.
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.10 Clearly, the fraud, if and when established, would vitiate the contract and relieve the insurer of possible liability thereunder.11
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 *233its own initiative finds that a right of trial hy jury * * * does not exist * * (Emphasis herein added.)

. 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.