Cartwright v. Equitable Life Assur. Soc. of U.S., 95-138

CourtUnited States State Supreme Court of Montana
Citation914 P.2d 976,276 Mont. 1
Docket NumberNo. 95-138,95-138
PartiesRobert CARTWRIGHT, Ferris H. (Buster) Ness and Grace Ness, husband and wife, Plaintiffs, Respondents, and Cross-Appellants, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES and Blaine LeSuer, Defendants, Appellants, and Cross-Respondents.
Decision Date15 April 1996

Appeal from District Court of the Twelfth Judicial District, In and For the County of Hill, The Honorable John Warner, Judge presiding.

Richard E. Gillespie, Keller, Reynolds, Drake, Johnson & Gillespie, Helena, for appellant The Equitable.

Theodore K. Thompson, Attorney at Law, Havre, for appellant Blaine LeSuer.

Ward E. Taleff, Alexander, Baucus, & Paul, Great Falls, Brian Lilletvedt, Bosch, Kuhr, Dugdale, Martin & Kaze, Havre, for respondents.


The plaintiffs, Robert Cartwright, Ferris H. (Buster) Ness, and Grace Ness, commenced this action by amended complaint filed in the District Court for the Twelfth Judicial District in Hill County. They alleged that the defendant, Blaine LeSuer, in his capacity as an agent for the defendant, The Equitable Life Assurance Society of the United States, misrepresented the terms of life insurance policies that he sold to them, that they relied on those misrepresentations to their detriment, and that as a result of the defendants' conduct, they were entitled to compensatory and punitive damages. The defendants denied the material allegations of the plaintiffs' amended complaint and asserted various affirmative defenses.

Following a jury trial in Hill County, the jury returned a verdict in favor of the plaintiffs in which it found that the defendants were liable to the plaintiffs for compensatory damages based on breach of fiduciary duty, negligent misrepresentation, negligence, constructive fraud, and actual fraud. The jury also found that the defendants were liable for punitive damages. They awarded actual damages to Cartwright in the amount of $144,025, to Grace Ness in the amount of $44,738, and to Buster Ness in the amount of $169,828. After considering further evidence and arguments, the jury returned punitive damage awards in favor of the plaintiffs in the amount of $30,000 against LeSuer, and in the amount of $6,127,845 against Equitable. Following its statutory review of the jury's punitive damage awards, the District Court reduced the amount assessed against LeSuer to $18,000, and reduced the amount assessed against Equitable to $4,000,000.

LeSuer and Equitable appeal from the judgment entered against them. Cartwright and Grace and Buster Ness cross-appeal the District Court's reduction of the jury's punitive damage awards. We affirm the jury's verdict, reverse the order of the District Court which reduced its verdict, and remand for entry of judgment consistent with the jury's verdict.

Although numerous issues are raised by LeSuer and Equitable, we conclude that the following issues are dispositive of their appeals:

1. Were the plaintiffs' claims barred by the applicable statutes of limitations?

2. Did the District Court abuse its discretion when it admitted evidence that LeSuer had similarly misrepresented the terms of policies to other individuals? If not, did the District Court err by precluding further evidence of the specific manner in which those person's claims against Equitable were resolved?

3. Was the jury's finding that the defendants committed fraud supported by substantial evidence?

4. Was the jury's award of actual damages supported by substantial evidence?

5. Did the District Court abuse its discretion when it refused to instruct the jury that plaintiffs could not recover for fraud in light of their failure to examine the insurance policies they purchased?

6. Was there substantial evidence to support an award of punitive damages against each defendant?

7. Should the plaintiffs' compensatory damage awards be reduced by a percentage equal to the degree to which the jury found that each plaintiff was contributorily negligent?

8. Did the District Court err by its award of punitive damages made pursuant to § 27-1-221, MCA?

The issue raised by the plaintiffs' cross-appeal is whether the District Court erred when, pursuant to its statutory obligation to review the jury's punitive damage awards, it reduced the amounts of those awards.


Buster Ness had been insured by Equitable Life Assurance Company since he was eleven years old when his father purchased a life insurance policy for him. In 1950, when he was 21, he purchased his own retirement policy from Equitable.

Buster first met Blaine LeSuer in 1962 when he began purchasing chemicals from LeSuer's chemical supply business for use in Buster's crop spraying business. Although that business relationship ended in the 1960s, the two of them stayed in touch with each other occasionally and Buster would contact LeSuer when he had questions regarding the chemical business.

After working out of state with other firms for a period of years, LeSuer applied for employment with Equitable and received his license to sell life and disability insurance in 1980. After he became an insurance agent he continued to stop at Ness's place of business periodically to discuss the chemical business and occasionally inquire about Buster's or Grace's life insurance needs.

In April 1982, Buster agreed to purchase and LeSuer agreed to sell on behalf of Equitable, a whole life insurance policy insuring the life of Grace Ness for the face amount of $25,000. Page three of the policy indicated that the premium period was thirty-five years and that the annual premium was $541.25. However, Grace testified that they were told by LeSuer that they would only have to pay premiums for four or five years and that after that time the policy would be self-sustaining. They paid the premiums for that policy through 1985. However, when they got a premium notice in 1986, they contacted LeSuer to find out why they had received an additional premium notice. According to the Nesses, he advised them "not to worry about it." He told them that it was a bookkeeping error at Equitable's home office and that he would take care of it. When, in subsequent years, they received similar premium notices which by then indicated that loans had been advanced against the policy value to pay the previous year's premium, they had similar conversations with LeSuer and, according to their testimony, were given similar assurances.

In 1982 Buster and Bob Cartwright applied for an SBA loan to operate their agricultural products business. They were advised by their banker that they would need $150,000 of life insurance per person to guarantee repayment of the loan in the event that either of them died before it was repaid. After discussing the loan requirements with LeSuer, each of them agreed to purchase from him and Equitable a convertible term life insurance policy for the face amount of $150,000. Those policies were issued in June 1982. They are not the subject of plaintiffs' claims, but were converted to whole life insurance policies in 1986 and 1988 which are the subject of the plaintiffs' claims.

During 1982 Buster and Grace also purchased convertible term life insurance policies from LeSuer and Equitable insuring each of their lives for the face amount of $100,000 to assure payment of the debt which was secured by their farm. Neither are those policies the subject of the plaintiffs' claims. However, they were also later converted to whole life policies which are the subject of their claims.

In 1983 LeSuer advised Buster that he could replace the retirement policy Buster had purchased in 1950 by converting it to a better policy with greater coverage. Grace also testified that they were told by LeSuer that only four or five premium payments would have to be made by them to purchase paid up coverage under the new 1993 policy. Buster testified that they were told that premiums would eventually be paid on the policy from accumulated dividends which the policy earned. Premium payments were made for that policy in 1983, 1984, and 1985. When the fourth premium notice was received in 1986, there apparently was some confusion about how many premiums would be due. According to Buster, he contacted LeSuer and was advised that there had been a computer mixup, that he should not worry about it, and that LeSuer would take care of it. The next premium notice was received in 1987 and showed that a loan had been taken against the policy to pay the previous year's premium. He recontacted LeSuer and, according to him, was given similar assurances during that and subsequent years.

In 1986 the premium for Buster's $150,000 term life policy, and for Buster's and Grace's $100,000 term policies had increased substantially and so they discussed alternatives with LeSuer. He suggested that the three policies be converted to whole life policies. According to Buster and Grace, he told them that after three premium payments the policies would be self-sustaining and they would not have to make the future premium payments. Based on those representations, Buster purchased whole life policies for the face amount of $150,000 and $100,000 from Equitable in 1986. An additional whole policy in the face amount of $100,000 was issued by Equitable to Grace in 1986. The third page of Buster's 1983 whole life policy indicated that premiums were due for thirty years. The third page of the whole life policies purchased by Buster and Grace in 1986 indicated that premiums were due for life. However, Grace testified that when the policies were delivered by LeSuer he did not bother to explain the terms, or suggest that they read them. She stated that he simply said to put them in a safe place and if they ever had a question that he would help them with it.

The Nesses paid premiums for the whole life policies they purchased in 1986 during 1986, 1987,...

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