St. George Creaghe v. Iowa Home Mutual Casualty Company
323 F.2d 981, 1963 U.S. App. LEXIS 3833 (1963)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Testimony that repeats an out-of-court statement is not inadmissible hearsay if the statement itself constitutes a 'verbal act' or has independent legal significance, such as the oral formation or termination of a contract.
Facts:
- The appellee insurance company issued a commercial vehicle liability policy to Muril J. Osborn.
- Osborn made only a partial premium payment to the agent, and the agent retained physical possession of the policy to make ongoing changes to the coverage.
- Osborn later sent the agent a check for part of the remaining balance, but the check was returned for insufficient funds.
- On October 19, Osborn visited the agent's office and, in the presence of the agent and a secretary, stated he wanted the insurance policy cancelled immediately.
- The agent returned the bounced check to Osborn; since the agent already held the policy document, there was no physical surrender of the policy by Osborn.
- On November 25, Osborn's truck was involved in a collision with the plaintiff's car.
- The plaintiff obtained a civil judgment against Osborn for damages arising from the collision, but the judgment remained unsatisfied.
Procedural Posture:
- The plaintiff, holding an unsatisfied judgment against Muril J. Osborn, sued Osborn's insurer (the appellee) in federal district court to collect on the judgment.
- At trial, both parties moved for a directed verdict.
- The trial court submitted interrogatories to the jury, which answered them in a manner favorable to the plaintiff.
- Despite the jury's answers, the trial judge granted a directed verdict in favor of the appellee insurance company, finding there was no material fact for the jury to decide.
- The plaintiff appealed the directed verdict to the U.S. Court of Appeals for the Tenth Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is testimony by an insurance agent regarding an insured's oral statements of intent to cancel an insurance policy inadmissible hearsay in a subsequent action by a third-party victim against the insurer?
Opinions:
Majority - Seth, Circuit Judge.
No. Testimony regarding an insured's oral statements to cancel a policy is not hearsay because the statements are verbal acts with legal significance. The hearsay rule prohibits introducing out-of-court statements to prove the truth of the matter asserted. Here, the agent's testimony about Osborn's statements was not offered to prove that Osborn was being truthful about his reasons for cancellation or his future intentions. Instead, it was offered simply to prove that Osborn actually made the statements, as the act of speaking those words itself legally effected the cancellation of the contract. Such statements are considered legally operative facts, or 'verbal acts,' and are therefore admissible. The court does not need to rely on the credibility of the out-of-court declarant (Osborn); it only needs to assess the credibility of the testifying witness (the agent) who heard the statements being made.
Analysis:
This decision reinforces the fundamental 'verbal acts' or 'legally operative facts' doctrine, a key exception to the rule against hearsay. It clarifies that words of contract formation, modification, or termination are not treated as hearsay because their utterance is, in itself, a legally significant event. The case establishes that the focus of admissibility is not on the truthfulness of the content of the statement, but on the fact that the statement was made. This precedent is crucial for cases involving oral contracts or modifications, as it provides the mechanism for admitting testimony about what the contracting parties said to one another.
