DocketNumber: 98-1584
Filed Date: 7/27/1999
Status: Precedential
Modified Date: 9/21/2015
<head>
<title>USCA1 Opinion</title>
<style type="text/css" media="screen, projection, print">
<!--
@import url(/css/dflt_styles.css);
-->
</style>
</head>
<body>
<p align=center>
</p><br>
<pre> United States Court of Appeals <br> For the First Circuit <br> ____________________ <br> <br>No. 98-1584 <br> <br> SHEILS TITLE COMPANY, INC., <br> <br> Plaintiff, Appellee, <br> <br> v. <br> <br> COMMONWEALTH LAND TITLE INSURANCE CO., <br> <br> Defendant, Appellant. <br> <br> ____________________ <br> <br>No. 98-1585 <br> <br> SHEILS TITLE COMPANY, INC., <br> <br> Plaintiff, Appellant, <br> <br> v. <br> <br> COMMONWEALTH LAND TITLE INSURANCE CO., <br> <br> Defendant, Appellee. <br> <br> ____________________ <br> <br> <br> APPEALS FROM THE UNITED STATES DISTRICT COURT <br> <br> FOR THE DISTRICT OF PUERTO RICO <br> <br> [Hon. Carmen Consuelo Cerezo, U.S. District Judge] <br> <br> ____________________ <br> <br> Before <br> <br> Torruella, Chief Judge, <br> <br> Coffin and Cyr, Senior Circuit Judges. <br> <br> _____________________
Rafael Escalera-Rodrguez, with whom Thomas J. Code, Reichard <br>& Escalera, Stuart H. Singer, Carlos M. Sires, Richard J. Brener <br>and Kirkpatrick & Lockhart LLP were on brief, for Commonwealth Land <br>Title Insurance Company. <br> Fernando L. Gallardo, with whom Woods & Woods, were on brief <br>for Sheils Title Company, Inc. <br> <br> <br> ____________________ <br> <br> July 15, 1999 <br> ____________________
TORRUELLA, Chief Judge. The underlying dispute in this <br>case arises out of an April 1, 1993 agency agreement entered into <br>between Commonwealth Land Title Insurance Company ("Commonwealth") <br>and Sheils Title Company, Inc. ("Sheils"). Under the agreement, <br>Sheils was appointed a non-exclusive agent of Commonwealth, and was <br>authorized to solicit and issue Commonwealth title insurance <br>policies in Puerto Rico. By letter dated January 13, 1995, <br>Commonwealth informed Sheils that the agency agreement would be <br>terminated, effective ninety days from the date of the letter. On <br>January 25, 1995, Sheils initiated this action in the United States <br>District Court for the District of Puerto Rico alleging that <br>Commonwealth's termination of the agreement violated P.R. Laws Ann. <br>tit. 10, 278a ("Law 75"). Commonwealth counterclaimed for <br>recovery of payments it made as a result of Sheils's alleged <br>negligence in the issuance of certain title insurance policies. <br> On August 23, 1997, a jury returned a verdict in favor of <br>Sheils on both Sheils's Law 75 claim and Commonwealth's <br>counterclaim. The district court entered judgment on September 5, <br>1997. On September 11, Commonwealth renewed its motion for <br>judgment as a matter of law, and, in the alternative, only with <br>respect to its counterclaim, for a new trial. Sheils also moved <br>for a new trial solely on the issue of Law 75 damages. On <br>March 13, 1998, the district court issued an Opinion and Order <br>denying all of these post-verdict motions. Commonwealth and Sheils <br>both appeal.
BACKGROUND <br> Commonwealth insures title to, and other interests in, <br>real property in all fifty states and in Puerto Rico. On April 1, <br>1993, Commonwealth and Sheils entered into an agency agreement <br>under which Sheils became a non-exclusive agent of Commmonwealth. <br>The agreement authorized Sheils to solicit and issue Commonwealth <br>title insurance policies in Puerto Rico. The majority of the <br>policies issued by Commonwealth on the island were mortgagee <br>policies, insuring the mortgage interest of the lender and its <br>successors in interest. The purchasers of these mortgagee policies <br>were institutional lenders. <br> Under the terms of the agency agreement, Sheils was <br>authorized to issue policies under $1,000,000 without obtaining <br>prior consent from Commonwealth. Sheils was also authorized to <br>collect the premiums belonging to Commonwealth on its behalf. <br>Although the policies were issued by Sheils as Commonwealth's <br>agent, Commonwealth bore all the risk of liability under the <br>policies. <br> Because Commonwealth bore all the risk of liability, the <br>agency agreement contained several provisions restricting Sheils's <br>discretion in issuing Commonwealth policies. One of these <br>provisions prohibited Sheils from engaging in conflict of interest <br>transactions without first obtaining written consent from <br>Commonwealth. Another provision permitted Commonwealth to <br>terminate the agency agreement upon ninety days notice in the event <br>that losses resulting from policies "produced by" Sheils exceeded <br>25% of annual net premium dollars received from Sheils in a given <br>year. <br> Prior to termination of the agency agreement, Sheils <br>conducted business with a number of Puerto Rico financial <br>institutions, including Bankers Finance Mortgage Corporation <br>("Bankers Finance"). Sheils issued numerous Commonwealth mortgagee <br>title insurance policies to Bankers Finance. At the time those <br>policies were issued, Michael Sheils, the president and owner of <br>Sheils Title, owned up to 9% of the stock of Bankers Finance. <br>Michael Sheils never obtained written consent from Commonwealth to <br>issue Commonwealth title insurance policies to Bankers Finance. <br> As an institutional lender, Bankers Finance routinely <br>issued residential mortgage loans and purchased corresponding <br>mortgagee title insurance policies. Each title insurance policy <br>insured that the mortgage acquired by Bankers Finance as security <br>for the loan was the first and primary lien on the property. <br>Because the vast majority of Bankers Finance residential mortgage <br>loans were made in the context of a refinancing of an existing <br>mortgage loan, it was often necessary for the existing mortgage <br>loan to be discharged in order for the Bankers Finance loan to <br>attain first priority. The typical practice in the industry was to <br>use the Bankers Finance loan proceeds to discharge the existing <br>mortgage in order to attain first priority for the Bankers Finance <br>mortgage interest. <br> Unfortunately, Bankers Finance did not follow the typical <br>practice. Instead, Jos Alegra, the President of Bankers Finance, <br>engaged in a fraudulent scheme whereby he falsely represented to <br>Sheils that the Bankers Finance loan proceeds were being used to <br>discharge the existing loans. In reliance on this representation, <br>Sheils issued title insurance policies insuring that the Bankers <br>Finance mortgage interest was the first and primary lien on various <br>properties. <br> Once Bankers Finance acquired title insurance from <br>Sheils, its mortgage interests became marketable. Bankers Finance <br>sold several of its mortgage notes to Citibank. Upon acquisition, <br>Citibank became the insured under the Sheils-issued title insurance <br>policy. Eventually, Citibank discovered that the mortgage notes it <br>had purchased from Bankers Finance did not have first priority <br>status because the prior liens had not been discharged. Citibank <br>promptly submitted claims to Sheils under the corresponding <br>Commonwealth title insurance policies. All of the claims submitted <br>by Citibank resulted from title insurance policies issued by <br>Sheils. <br> In 1994, the losses suffered by Commonwealth as a result <br>of claims made under Sheils-issued title insurance policies <br>exceeded 250% of the net premium dollars received from Sheils -- <br>ten times the percentage required to trigger Commonwealth's right <br>to terminate the agency agreement under Paragraph 16(c)1, the <br>excessive claims provision. Accordingly, by letter dated <br>January 13, 1995, Commonwealth informed Sheils that the agency <br>agreement would be terminated, effective ninety days after the date <br>of the letter. <br> DISCUSSION <br>1. The Applicability of Law 75 <br> At the close of evidence, Commonwealth moved for judgment <br>as a matter of law on Sheils's Law 75 claim. In its motion, <br>Commonwealth argued that it was entitled to judgment on the ground <br>that Sheils failed to produce any evidence that the <br>Commonwealth/Sheils relationship was protected by Law 75. <br> Law 75 was enacted to prevent suppliers from arbitrarily <br>terminating dealers in Puerto Rico once these dealers had invested <br>in the business to create and build a profitable market for the <br>suppliers' products. See Newell Puerto Rico, Ltd. v. Rubbermaid <br>Inc., 20 F.3d 15, 22 (1st Cir. 1994). The effect of Law 75 is not <br>only to protect local distributors from arbitrary termination, but <br>also to bind the supplier to the dealership agreement unless it can <br>prove "just cause" for termination. See 10 L.P.R.A. 278a. If <br>a supplier cannot prove "just cause" for termination of a <br>dealership agreement, the statute authorizes the court to <br>compensate the dealer "for the hard-earned clientele unjustly <br>appropriated by the supplier." Nike Int'l Ltd. v. Athletic Sales, <br>Inc., 689 F. Supp. 1235, 1238 (D.P.R. 1988). <br> Not all commercial relationships are protected by Law 75. <br>Rather, before invoking the remedies provided by the statute, a <br>court must first determine whether the commercial relationship at <br>issue constitutes a "dealer's contract" within the meaning of <br> 278(b). In San Juan Mercantile Corp. v. Canadian Transp. Co., <br>the Puerto Rico Supreme Court defined a Law 75 "dealer" as <br> one characterized by his endeavors to create a <br> favorable market and to draw customers to a <br> product or service by promoting and closing <br> sales contracts . . . . Publicity, market <br> coordination, merchandise deliveries, <br> collections, the keeping of an inventory, and <br> mainly the promotion and closing of sales <br> contracts are, in general terms, the <br> obligations of the dealer. <br> <br>P.R. Offic. Trans. No. O-78-97, slip op. at 220-21, 108 D.P.R. 211, <br>215 (Dec. 28, 1978). <br> Ten years later, in Roberco, Inc. v. Oxford Indus., Inc., <br>the Puerto Rico Supreme Court further clarified the definition of <br>"dealer" by providing a non-exhaustive list of factors to be taken <br>into consideration in determining whether an entity or person has <br>achieved protected status under Law 75: <br> In order to determine if a 'dealership' is <br> involved, several factors must be taken into <br> consideration, among them, if the 'dealer' <br> actively promotes the product and/or concludes <br> contracts; if he keeps an inventory; if he has <br> a say on price fixing; if he has discretion to <br> fix the sale terms; if he has delivery and <br> billing responsibilities and authority to <br> extend credit; if he independently or jointly <br> embarks on advertising campaigns; if he has <br> assumed the risks and responsibilities for the <br> activities undertaken; if he buys the product; <br> and if he has facilities and offers product- <br> related services to his clients. More could <br> be added inasmuch as a complete list is not <br> intended. <br> <br>122 D.P.R. 115, at 131-32, P.R. Offic. Trans. No. RE-85-300, slip <br>op. at 13 (June 30, 1988). The Roberco court also explained that <br>"no single factor is conclusive by itself and none has more weight <br>or importance than the others." Id. <br> Despite its acknowledgment of the Roberco factors, <br>Commonwealth argues that the subsequent Puerto Rico Supreme Court <br>decision in Oliveras v. Universal Ins. Co., 96 J.T.S. 45, P.R. <br>Offic. Trans. RE-89-435/RE-89-439, slip. op. (Nov. 7, 1996), <br>compels a finding that the relationship between Commonwealth and <br>Sheils Title falls outside the scope of protection of Law 75. In <br>making this argument, Commonwealth asserts that the Oliveras court <br>applied the Roberco factors to the relationship at issue in that <br>case and held that the relationship was not protected by Law 75. <br>Because of the "striking similarities" between the <br>Oliveras/Universal relationship and the Commonwealth/Sheils <br>relationship, Commonwealth contends that the Oliveras decision <br>entitles it to judgment as a matter of law on Sheils's Law 75 <br>claim. <br> We disagree with Commonwealth's statement of the holding <br>of Oliveras. In that case, Oliveras, Inc. ("Oliveras") entered <br>into a non-exclusive agency agreement with the Universal Insurance <br>Company ("Universal"). See id. at 290, slip op. at 8. When <br>Universal decided to cancel the agreement, Oliveras filed a <br>complaint alleging arbitrary termination under Law 75, and breach <br>of contract. See id. at 291, slip op. at 10. Ultimately, the <br>trial court entered judgment in favor of Oliveras on the breach of <br>contract cause of action in the amount of $1,093,106, and both <br>parties appealed. See id. at 291, slip op. at 10-11. Before the <br>Puerto Rico Supreme Court, Oliveras claimed that the court of first <br>instance erred by not awarding it Law 75 damages. See id. at 291, <br>slip op. at 11. <br> In Oliveras, the court did not hold that the <br>Oliveras/Univeral relationship was not protected by Law 75. <br>Rather, the court concluded that it did not need to make the <br>determination whether Oliveras was entitled to Law 75 damages <br>because <br> [e]ven assuming, for argumentative purposes, <br> that the contractual relationship that existed <br> between Universal and Oliveras was protected <br> by the aforecited Law 75, it is our criteria <br> that the concession of damages to Oliveras is <br> not pertinent: this because we understand that <br> Universal had "just cause" to cancel the <br> existing agreement. <br> <br>Oliveras, 96 J.T.S. at 294-95, slip op. at 15. Because the <br>Oliveras Court did not reach the question of the applicability of <br>Law 75, its decision clearly does not compel a finding that the <br>Commonwealth/Sheils relationship falls outside the scope of <br>protection of Law 75. <br> Having said this, and mindful of the care that the <br>Oliveras court took in assuming only argumentatively the <br>applicability of Law 75, we find ourselves in the same position. <br>As we shall explain, even assuming, without deciding, that the <br>relationship of Sheils to Commonwealth is that of a "dealership," <br>we conclude that Commonwealth had "just cause" to terminate the <br>agency agreement. <br>2. "Just Cause" <br> Commonwealth next challenges the district court's denial <br>of judgment as a matter of law with respect to Commonwealth's claim <br>that "just cause" existed for its termination of the agency <br>agreement. At the outset, it is important to note that Law 75 was <br>not intended to prevent termination of unworkable relationships, <br>but only to prevent arbitrary terminations. See R.W. Int'l Corp. <br>v. Welch Food, Inc., 13 F.3d 478, 485 (1st Cir. 1994). <br>Commonwealth asserts two grounds for its termination of the agency <br>agreement, and argues that both grounds constitute "just cause" as <br>a matter of law. See supra note 8. <br> Commonwealth first points to Sheils's performance during <br>calendar years 1993 and 1994, which triggered the exercise of <br>Commonwealth's rights under Paragraph 16(c)1 of the agency <br>agreement. Under Paragraph 16(c)1, Commonwealth reserved the right <br>to terminate the agreement, with ninety days written notice, if <br>"[d]uring any calendar year . . . claims expense produced by the <br>AGENT exceeds 25% of annual net premium remittance." At trial, <br>Commonwealth presented evidence that the claims submitted to <br>Commonwealth under policies issued by Sheils during calendar years <br>1993 and 1994 exceeded the amount of annual net premiums by 250% -- <br>more than ten times the percentage required to trigger Paragraph <br>16(c)1. Commonwealth argues that the issuance by Sheils of title <br>insurance policies resulting in over $1.8 million in losses, <br>constituted "just cause" for termination of Sheils as a <br>Commonwealth agent. <br> Although "just cause" is typically a question of fact for <br>the jury, see R.W. Int'l Corp. v. Welch Foods, Inc., 88 F.3d 49, 51 <br>(1st Cir. 1996), Sheils does not dispute the historical facts upon <br>which Commonwealth bases its right to exercise the excessive claims <br>provision. Nor does Sheils make the argument that Paragraph 16(c)1 <br>was not an "essential obligation" of the dealer's contract. See <br>P.R. Laws Ann. tit. 10, 278(d). Rather, Sheils contends that <br>Paragraph 16(c)1 should not apply because its language does not <br>accurately reflect the way that the title insurance business is <br>conducted in Puerto Rico. Specifically, Sheils argues that the <br>"produced by" language of the excessive claims provision renders <br>that provision inapplicable to Puerto Rico title insurance agents <br>because in Puerto Rico title insurance agents do not "produce" <br>claims. With respect to the $1.8 million of claims submitted by <br>Citibank to Commonwealth, Sheils makes the novel argument that <br>those claims were "produced by" Bankers Finance, and, more <br>specifically, by the misdeeds of its president, Jos Alegra -- not <br>by Sheils. <br> Sheils's argument, although imaginative, cannot prevail. <br>Regardless of the way in which the title insurance business is <br>conducted in Puerto Rico, see supra, note 11, we conclude that <br>Commonwealth reasonably intended and understood the term "produced" <br>to include within its scope all claims expenses resulting from <br>policies issued by Sheils. We reach this conclusion after <br>carefully considering the nature of the title insurance industry <br>and the evidence presented at trial. <br> First, the reality of title insurance is that it insures <br>failures to discover existing flaws or defects in title. As such, <br>title insurance differs significantly from other types of <br>insurance. Weigel explained this difference at trial: <br> A: Our business is a little bit different. <br> More -- most other kinds of insurance, the <br> whole idea is they assume the risk. In our <br> business we try to eliminate the risk or to <br> avoid the risk. <br> <br> Q: How is that possible? <br> <br> A: It is possible when you take a look at the <br> historical record of a title and search the <br> title properly and make sure that the liens on <br> the property are discharged and do all of the <br> research necessary and file all of the proper <br> documents, you eliminate the risk involved in <br> a title insurance policy. <br> <br> Q: How is that different [from] a life <br> insurance company when it examines someone to <br> issue a life insurance policy? <br> <br> A: People make comparisons with a doctor's <br> examination. If you think about examining the <br> title as you do about examining the person, <br> the difference is if you examine the title and <br> you do the job you are eliminating the <br> possibility of anything bad happening. You <br> are eliminating the possibility of a claim. <br> <br>(Tr. 8/19/97 Afternoon Sess. at 31-32.) As Weigel explained, title <br>insurance is unique in that it looks backwards, not forwards, and <br>insures the validity and accuracy of an existing, historical <br>document. This historical focus is a double-edged sword from the <br>perspective of a title insurance agent. On the one hand, it <br>renders agents entirely capable of eliminating risk of liability <br>under the terms of a title insurance policy. On the other hand, it <br>means that any claims expenses that result will, in most cases, be <br>caused directly or indirectly by the agent. Commonwealth presented <br>evidence at trial to this effect: <br> Q: Let me ask you a little bit about the <br> difference or the elements that make our kind <br> of insurance different. How would you compare <br> our business in terms of the assumption of <br> risk with other insurance business? <br> <br> A: We're all insurance companies. We assume <br> the risk in exchange for a premium, for an <br> amount of money that we're paid to assume <br> that. The agent in all cases is the person <br> that can -- is there to protect the company <br> from, prevent losses. The example that I <br> would say is that in an auto insurance <br> company, for example, you're going to run a -- <br> check the driving record of the driver. If <br> you find out that the driver has been arrested <br> five times for drunk driving and crashed <br> several times, you're not going to insure him <br> . . . And it's the same way with title <br> insurance. <br> <br> Q: Yes, but in other types of insurance you <br> can have the best driver in the world and you <br> can -- and he can have an accident and you can <br> have the healthiest guy die. Is that our <br> business, sir? <br> <br> A: Yes. We have a risk, but again it's back <br> to the agent. The agent is in the position <br> and in title insurance the primary thing that <br> the agent must do is make sure that [the] <br> prior mortgage has been canceled, it's been <br> paid before they issue that new policy. <br> <br>(Tr. 8/13/97 Morning Sess. at 28-29.) The undisputed testimony of <br>both Smith and Weigel establishes that, because of the unique <br>nature of the title insurance industry, title agents directly or <br>indirectly cause most claims expenses. In light of this <br>uncontested evidence, the intended meaning of the "produced by" <br>term in Paragraph 16(c)1 is clear. We conclude that Commonwealth <br>reasonably intended and expected the term "produced by" to include <br>within the scope of Paragraph 16(c)1 all claims expenses resulting <br>from policies issued by Sheils. <br> Sheils's second argument fares no better. Sheils argues <br>that, assuming arguendo that the excessive claims provision is <br>applicable to it as a Puerto Rico title insurance agent, <br>Commonwealth failed to carry its burden under 278a-1(c) to prove <br>that the 25% provision was reasonable given the realities of the <br>Puerto Rican market. Section 278a-1(c) states: <br> The violation or nonperformance by the dealer <br> of any provision included in the dealer's <br> contract fixing rules of conduct or <br> distribution quotas or goals because it does <br> not adjust to the realities of the Puerto <br> Rican market at the time of the violation or <br> nonperformance by the dealer shall not be <br> deemed just cause. The burden of proof to <br> show the reasonableness of the rule of conduct <br> or of the quota or goal fixed shall rest on <br> the principal or grantor. <br> <br>P.R. Laws Ann. tit. 10, 278a-1(c). In making this argument, <br>however, Sheils ignores the evidence in the record that <br>Commonwealth's other agents in Puerto Rico were able to maintain <br>their claims expense at under 11% of their annual net remittances. <br>At trial, Donald C. Weigel, President of northern operations for <br>Commonwealth, specifically testified as to the reasonableness of <br>the 25% excessive claims provision in the Commonwealth/Sheils <br>agreement: <br> Q. Tell us, according to the company numbers <br> for the same period of time, what was the <br> situation in Puerto Rico if you consider <br> all of your agents except Sheils Title? <br> <br> A: Without Sheils Title you will see that our <br> claims experience there is 10.9%, which is <br> below the national average, which means <br> for the company it [Puerto Rico] is an <br> attractive place to do business. <br> <br>(Tr. 8/19/97 Afternoon Session at 29.) The testimony of Mr. Weigel <br>to the effect that Commonwealth's other agents in Puerto Rico were <br>able to maintain their claims expenses well under 25% is sufficient <br>evidence of the reasonableness of the excessive claims provision to <br>satisfy Commonwealth's burden under 278a-1(c). Moreover, Sheils <br>failed to come forward with any contradictory evidence on this <br>point. <br> Again, the language of Paragraph 16(c)1 is clear and <br>unambiguous: Commonwealth is entitled to terminate Sheils as its <br>agent when, during any calendar year, the claims expense on <br>policies issued by Sheils exceeds 25% of annual net premiums. The <br>facts are not in dispute. The claims submitted to Commonwealth <br>under Sheils-issued policies exceeded at least 250% of the net <br>premiums in calendar years 1993 and 1994. After careful <br>consideration of the record, we conclude that Commonwealth had <br>"just cause", as a matter of law, to terminate Sheils as its agent. <br> Because we find that the excessive claims provision <br>constituted "just cause" for termination of the Commonwealth/Sheils <br>agency agreement, we need not reach Commonwealth's second ground <br>for termination: the conflict of interest provision. <br> Our conclusion also renders moot Sheils's appeal from the <br>district court's denial of its motion for a new trial on the issue <br>of Law 75 damages. Sheils is no longer entitled to Law 75 damages, <br>let alone a new trial. <br>3. Commonwealth's Counterclaim for Negligence <br> In response to Sheils's complaint alleging arbitrary <br>termination in violation of Law 75, Commonwealth asserted a <br>counterclaim against Sheils for recovery of the approximately $1.8 <br>million it paid in claims as a result of Sheils's alleged <br>negligence. Commonwealth's based its counterclaim on Paragraph <br>13(a) of the agency agreement, which provides that Sheils shall be <br>liable to Commonwealth for "any loss, cost or expense . . . <br>sustained or incurred by [Commonwealth] and arising from the fraud, <br>negligence or misconduct of [Sheils]." Commonwealth argued that <br>Sheils was negligent in failing to assure that existing mortgages <br>were in fact being discharged prior to insuring the priority of new <br>mortgages. <br> To recover damages based on Sheils's negligence under <br>Paragraph 13(a), Commonwealth was required to prove that: (1) <br>Sheils owed a duty to Commonwealth to conform its conduct to a <br>reasonable standard of care; (2) Sheils breached that duty; and (3) <br>Sheils's breach caused Commonwealth harm. See Tokio Marine & Fire <br>Ins. Co., Ltd. v. Grove Mfg. Co., 958 F.2d 1169, 1171 (1st Cir. <br>1992). At trial, Sheils did not dispute the first element of this <br>cause of action; it acknowledged that as Commonwealth's title <br>insurance agent it owed a duty to Commonwealth to ensure that prior <br>liens were timely paid and canceled. Rather, Sheils disputed the <br>second element: namely, that the steps it took and the procedures <br>it implemented to fulfill this duty fell below a reasonable <br>standard of care. <br> At the close of evidence, the jury returned a verdict <br>against Commonwealth on its negligence counterclaim. After <br>judgment was entered, Commonwealth moved for judgment as a matter <br>of law, or, in the alternative for a new trial on its counterclaim. <br>The district court denied both motions, and Commonwealth now <br>appeals. <br> Our review of a denial of judgment as a matter of law is <br>severely circumscribed. See Conway v. Electro Switch Corp., 825 <br>F.2d 593, 598 (1st Cir. 1987). We must sustain the district <br>court's denial of a Fed. R. Civ. P. 50(b) motion, "unless the <br>evidence, together with all reasonable inferences in favor of the <br>verdict, could lead a reasonable person to only one conclusion, <br>namely, that the moving party was entitled to judgment." Birch v. <br>PH Group, 985 F.2d 649, 653 (1st Cir. 1993). <br> On the other hand, we review denial of a motion for a new <br>trial for abuse of discretion. See id. Under Fed. R. Civ. P. 59, <br>a trial judge has ample power to set aside the verdict and grant a <br>new trial if he or she is of the opinion that the verdict is <br>against the clear weight of the evidence. See Coffran v. Hitchcock <br>Clinic, Inc., 683 F.2d 5, 6 (1st Cir. 1982). In denying a motion <br>for a new trial, there is no abuse of discretion unless "the <br>verdict was so clearly against the weight of the evidence as to <br>amount to a manifest miscarriage of justice." PH Group, 985 F.2d <br>at 653 (citations and quotations omitted). With these standards in <br>mind, we examine the evidence presented at trial to determine <br>whether Commonwealth's allegations of error are correct. <br> At trial, Sheils presented evidence that to fulfill its <br>duty of care to Commonwealth it employed in-house attorneys and <br>other personnel to perform spot checks of the payment and <br>cancellation of prior liens. Michael Sheils explained the <br>procedure utilized by the company: <br> say we would close 100 cases in one month. <br> Maybe we would check 20 of them and not check <br> them all. It was impossible to check them <br> all. We would send several investigators to <br> the registry . . . . to make sure that the <br> cancellation of Bank No. 2 canceling Bank No. <br> 1's mortgage, we wanted to make sure that was <br> canceled. <br> <br>(Tr. 7/17/97 Morning Session at 75-76.) One of the attorneys <br>employed to perform these spot checks, Robert Segarra, further <br>testified that spot checking was the typical business practice of <br>title insurance agents in Puerto Rico, and that his current <br>employer, San Juan Abstract Company, utilized the same procedure. <br> With respect to the policies issued to Bankers Finance, <br>Sheils also presented evidence of its efforts to obtain additional <br>verification -- beyond the spot checks -- of the cancellation of <br>prior mortgages. Specifically, Segarra testified that, pursuant to <br>instructions from Michael Sheils, he wrote a letter dated June 30, <br>1993 to Jos Gmez Alegra, the attorney for Bankers Finance, <br>requesting confirmation that Bankers Finance was performing timely <br>cancellations. The Bankers Finance attorney responded, in writing, <br>that cancellations were being performed diligently. In the letter, <br>Gmez Alegra explained the procedure utilized by Bankers Finance <br>to ensure timely cancellations: namely, that a messenger of Bankers <br>Finance would hand-deliver a check in the amount of the outstanding <br>lien to the prior lienholder. Gmez Alegra even extended a <br>personal invitation to Segarra to visit the Bankers Finance offices <br>to observe its procedures and to obtain further verification of the <br>timely payment of prior liens. <br> Most significantly, several employees of Bankers Finance <br>testified that the nonpayment of prior mortgages was top secret at <br>Bankers Finance, and that only a small group of employees knew that <br>Lourdes Ramos was concealing the cut checks in a Federal Express <br>box in the top drawer of her desk pursuant to Jos Alegra's <br>orders. There is no evidence in the record that Sheils was aware <br>that these checks were not being forwarded to prior lienholders. <br> After hearing all of the evidence, the jury concluded <br>that Sheils's spot-check procedures and its additional follow-up <br>with Gmez Alegra satisfied its duty of care to Commonwealth to <br>ensure that prior mortgages were timely discharged. We cannot <br>agree that this conclusion was unreasonable. We do not consider <br>the jury's verdict "so clearly against the weight of the evidence <br>as to amount to a manifest miscarriage of justice." PH Group, 985 <br>F.2d at 653 (citations and quotations omitted). We, therefore, <br>affirm the district court's denial of Commonwealth's motion for <br>judgment as a matter of law and for a new trial with respect to its <br>negligence counterclaim. <br> CONCLUSION <br> For the reasons stated above, we reverse the district <br>court's denial of judgment as a matter of law with respect to the <br>existence of "just cause" for Commonwealth's termination of the <br>agency agreement. However, we affirm the district court's denial <br>of judgment as a matter of law with respect to Commonwealth's <br>counterclaim for negligence. <br></pre>
</body>
</html>
Marion v. Coffran v. Hitchcock Clinic, Inc. , 683 F.2d 5 ( 1982 )
Nike International Ltd. v. Athletic Sales, Inc. , 689 F. Supp. 1235 ( 1988 )
R.W. International Corp. v. Welch Foods, Inc. , 88 F.3d 49 ( 1996 )
The Ph Group Ltd., F/k/a, Cognetics Europe Ltd v. David L. ... , 985 F.2d 649 ( 1993 )
R.W. International Corp. v. Welch Food, Inc. , 13 F.3d 478 ( 1994 )
Newell Puerto Rico, Ltd. v. Rubbermaid Incorporated, Newell ... , 20 F.3d 15 ( 1994 )