## Facts

- Spanno Corporation issued “residual value guarantees” on capital equipment and purchased insurance from Colonial Assurance Company and Union International Insurance Company to back those guarantees.
- Colonial and Union obtained reinsurance from Mercantile & General Reinsurance Co., PLC.
- Mercantile sued to rescind the reinsurance contracts, alleging Spanno made material misrepresentations that induced the reinsurance placements.
- Spanno asserted it was an intended third-party beneficiary of the reinsurance and counterclaimed for damages for breach of contract and intentional interference with Spanno’s contracts with Colonial and Union.
- A jury, responding to special interrogatories, found that Spanno was an intended third-party beneficiary, Mercantile breached the reinsurance contracts, Spanno made no material misrepresentations, and Mercantile intentionally interfered with Spanno’s contracts; the jury awarded Spanno approximately $14.7 million in damages.
- The trial court treated the misrepresentation issue as equitable and the jury’s findings as advisory, then set aside key jury findings, rescinded the reinsurance agreements, and dismissed Spanno’s counterclaims.
- The Appellate Division reversed and reinstated the jury verdict; Mercantile appealed.

## Issues

1. In an action containing both legal and equitable claims, may a court treat a jury’s findings on factual issues as merely advisory when those facts are common to legal claims triable by right to a jury?
2. If the jury resolves a common factual issue (material misrepresentation) against the party seeking equitable relief (rescission), may the court later disregard that finding and grant rescission?

## Decision

- The Court of Appeals affirmed the Appellate Division.
- Where legal and equitable claims share common factual issues, and the legal claims are jury-triable, the jury’s findings on those common issues are binding on the court.
- The trial court erred by disregarding the jury’s “no material misrepresentation” finding and rescinding the reinsurance contracts.
- The jury verdict for Spanno, including the damages award, was reinstated.

## Legal Principles

- Rescission is an equitable remedy generally tried to the court, but the court may not displace jury determinations on factual issues that are also necessary to jury-triable legal claims.
- In mixed law-equity actions, CPLR provisions permitting advisory juries in equitable matters do not permit a court to treat as advisory a jury finding on a fact issue common to legal claims tried as of right.
- Once a jury conclusively decides a common factual issue in resolving legal claims, the court must accept that determination when adjudicating related equitable claims.

## Conclusion

The court held that in a combined legal and equitable case, the jury’s findings on factual issues common to jury-triable legal claims are conclusive and must be applied by the court when deciding equitable claims, preventing rescission based on facts the jury rejected.


Mercantile & General Reinsurance Co. v. Colonial Assurance Co., 82 N.Y.2d 248 (1993)