Dominick v. Dixie Nat. Life Ins. Co., s. 85-7140
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
| Citation | 809 F.2d 1559 |
| Docket Number | Nos. 85-7140,85-7457,85-7204,s. 85-7140 |
| Parties | William Aubrey DOMINICK, Jr., et al. Plaintiffs-Appellants, v. DIXIE NATIONAL LIFE INSURANCE COMPANY, et al., Defendants-Appellees. Robert Lyle FUNDABURK, Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE CO., et al., Defendants-Appellees. Robert E. JOHNSON, Jr., Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE CO., a corporation, Lincoln National Sales Corporation of Central Alabama, a corporation, and the Lincoln National Life Insurance Company, a corporation, Defendants-Appellees. Carlton S. & Chrystle BONE, Plaintiffs-Appellants, v. DIXIE NATIONAL LIFE INSURANCE CO., Lincoln National Sales Corporation of Central Alabama; and the Lincoln National Life Insurance Company, Defendants-Appellees. Jerry Lee FOWLER, Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE CO., Defendant-Appellee. Russell Jeffrey PINYAN, Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE CO., Milton L. Culver, Defendants-Appellees. Gilmer R. and Hilda E. GODFREY, Plaintiffs-Appellants, v. The LINCOLN NATIONAL LIFE INSURANCE COMPANY, etc., et al., Defendants-Appellees. Robert Kermit PINYAN, Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE CO., Defendant-Appellee. Julian D. EDWARDS, Plaintiff-Appellant, v. UNITED PRESIDENTIAL LIFE INSURANCE COMPANY, a corporation; Union Central Life Insurance Company, a corporation; Milton L. Culver, et al., Defendants-Appellees. Mary M. HUNT, Plaintiff-Appellant, v. UNITED PRESIDENTIAL LIFE INSURANCE COMPANY, a Corporation; Union Central Life Insurance Company, a corporation; Milton L. Culver, et al., Defendants-Appellees. Hubert A. GRISSOM, Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE COMPANY, et al., Defendant-Crossclaim Plaintiff-Appellee. Hoyt A. PONDER, Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE CO., Lincoln National Sales Corp. of Central Alabama & the Lincoln National Life Insurance Co., Defendants-Appellees. Garry Aaron WALKER, Plaintiff-Appellant, v. DIXIE NATIONAL LIFE INSURANCE CO., Defendant-Appellee. Warren N |
| Decision Date | 18 February 1987 |
Charles E. Sharp, Sadler, Sullivan, Sharp & Stutts, Joel A. Williams, Birmingham, Ala., for plaintiffs-appellants.
J. Gusty Yearout, Deborah Braden, Birmingham, Ala., for Wade Farmer.
William A. Robinson, Birmingham, Ala., for Dixie Nat. Life Ins. Co.
James E. Clark, Birmingham, Ala., for Atlantic American Ins. Co.
John B. Tally, Jr., Birmingham, Ala., for Union Cent. Life Ins. Co.
Appeals from the United States District Court for the Northern District of Alabama.
Before TJOFLAT and KRAVITCH, Circuit Judges, and TUTTLE, Senior Circuit Judge.
These twenty-three consolidated cases, each alleging fraud, come to us from the trial court's grant of summary judgment to the defendants. In some of the cases, Alabama's one-year statute of limitations for actions for fraud was the basis for summary judgment. In others, it was a release signed by the appellants; We must examine each case individually, since the propriety of summary judgment depends on the particular facts and circumstances of each case. Sufficient similarities exist, however, to warrant a single, generalized statement of facts.
Leamon Paul McWhorter is the central figure in these claims for fraud. He approached each of the appellants and convinced them to purchase annuity policies. 1 In most cases, he telephoned them and identified himself as an agent of an insurance company with which the particular appellant already owned a life insurance After speaking with appellants over the telephone, McWhorter went to their respective homes, where he pretended to explain the nature of the annuities which he sold. He told them that the annuity required only an initial premium, which would earn interest on the full amount of the premium paid in. He also told them that this principal and interest would be fully available to them whenever they wished to "withdraw" their "investments," just as is the case with an ordinary savings account.
policy. 2 He told appellants that the government was forcing insurance companies to pay higher interest and for that reason appellants should take out a Dixie National 3 policy in lieu of the Lincoln policy. He told some of the appellants that the new policy would earn interest at 7% and told others that it would earn interest at 10 to 12%, with some fluctuation
Actually, the annuities were "variable premium pension annuities" which require additional premium payments before the full amount of premium payments would become available as cash value. Contrary to McWorter's representations, these annuities did not earn interest on the full face amount of the initial premium, but earned interest only on a substantially reduced cash value. The cash value of these annuities after only one premium payment was reduced to only 20-80% of the initial premium amount because of the commissions to McWhorter and the appellee companies' initial administrative costs. 4 Although the vast majority of these annuities neither strictly required annual premium payments nor cancelled the policy for non-payment, the annuities were designed and intended for multiple contributions over a number of years. It could take up to seven years or more of the annual contributions, combined with interest accumulations, in order for an appellant's cash value to equal the amount of premiums paid. In sum, although these appellants believed that they could withdraw the full amount of their premium, plus interest, at any time after deposit, they could withdraw as cash value, or receive as annuity payments, only 20-80% of that premium plus interest on only 20-80% of the amount of the premium paid by them.
To pay the premium for the annuities, McWhorter "stripped" appellants' old policies, that is, he convinced them either to surrender the old life insurance policy for its cash value or to borrow against it. Some of the appellants did not realize they were borrowing from or surrendering their old policies. They believed they were simply transferring the funds from one policy to another issued by the same insurance company. McWhorter told many who did borrow against their policies that they would not have to pay interest on the loans. In fact, the loans were not interest free.
The trial court provided an informative sketch of how McWhorter managed to con so many people.
The plaintiffs point to several reasons for the extensive trust they placed in McWhorter: he possessed confidential information about the plaintiffs and their existing policies; he was knowledgeable and glib in his discussion of insurance; plaintiffs found him to be disarmingly friendly and slick in his presentation; and he allegedly capitalized upon the plaintiffs' confidence in the companies that had issued their existing life insurance policies. McWhorter won plaintiffs' confidence in his advice. They signed forms surrendering or taking loans on their existing insurance policies. They wrote checks to the defendant companies which issued the annuities (the "annuity companies"). And they signed applications for the annuities which, unless signed while still blank (as some plaintiffs allege), indicated that premium payments Most of the appellants claim that they did not learn of McWhorter's fraud until they were visited by Horace O'Neal, an attorney for Dixie National. O'Neal informed the appellants of McWhorter's misrepresentations, refunded their full initial premium, and secured their signature on releases. Some of the appellants claim O'Neal misrepresented the releases as receipts and importuned them to sign.
would be made annually. However, plaintiffs claim that because they trusted McWhorter, they did not read or attempt to understand the applications, but simply signed where he instructed them. McWhorter explained that additional premiums were optional, that plaintiffs could contribute more money to their annuities at any time, as a very few plaintiffs did, but that no further contributions were required in order for plaintiffs to be able to withdraw their full premium payments plus interest. In addition, at or near the time of sale McWhorter warned many of the plaintiffs that they would later be receiving premium notices from the annuity companies. He stated that these notices could be ignored since all further premium...
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