Nationwide Mutual Fire Insurance v. Rezainik , 258 Va. 491 ( 1999 )

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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