Gilmore v. Constitution Life Ins. Co.

• Decision Date: 02 October 1974
• Docket Number: No. 73-1963,73-1963
• Citation: 502 F.2d 1344
• Parties: Merritt Victor GILMORE and Rose L. Gilmore, Plaintiffs-Appellees, v. CONSTITUTION LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1344

502 F.2d 1344

Merritt Victor GILMORE and Rose L. Gilmore, Plaintiffs-Appellees, v. CONSTITUTION LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 73-1963.

United States Court of Appeals, Tenth Circuit.

Argued July 11, 1974.

Decided Sept. 12, 1974, Rehearing Denied Oct. 2, 1974.

Irvin M. Kent, Denver, Colo. (Victor T. Roushar and Petrie, Woodrow, Roushar & Weaver, Montrose, Colo., on the brief), for plaintiffs-appellees.

Kenneth L. Starr, Denver, Colo. (Hardin Holmes, James C. Ruh and Ireland, Stapleton, Pryor & Holmes, Denver, Colo., on the brief), for defendant-appellant.

Before BREITENSTEIN, McWILLIAMS and BARRETT, Circuit Judges.

Mc,WILLIAMS, Circuit Judge.

This is an agency case wherein the trial court held the principal liable for the fraud of its agent on the grounds that the principal had clothed its agent with such authority that the agent was apparently acting within the scope of his authority when he committed the fraudulent acts upon which the present action is based. The trial court accordingly entered judgment against the principal and the latter now appeals. We affirm.

The agent's fraud is undisputed and the only issue is the principal's liability therefor. In our view the trial court's ultimate findings are supported by the record and in reaching its conclusions the trial court did not misapprehend or misapply the local Colorado law bearing on the question of the apparent authority of an agent. Let us examine the events out of which the present controversy arises.

In 1952, Merritt Victor Gilmore purchased a policy of life insurance from the sterling Life Insurance Company. Gilmore, a resident of Montrose, Colorado, is a retired trucker who before his retirement operated a trucking business on Colorado's western slope hauling uranium for Union Carbide from 1949-63. Gilmore had only an eighth grade education and at the time of trial had been retired for several years. The policy of insurance thus purchased in 1952 had a maturity date of September 29, 1969, and a maturity value of $15,880. Sometime after issuing Gilmore the policy of insurance, Sterling Life Insurance Company was acquired by the Constitution Life Insurance Company.

The Constitution Life Insurance Company is a corporation organized under the laws of Illinois with its principal place of business in that state and it is authorized to transact business in Colorado. One Lejzor Bryks, a resident of Denver, was a general agent for Constitution in the state of Colorado from 1958 till October 7, 1971, when Constitution terminated the relationship. On December 15, 1971, Bryks committed suicide.

Gilmore first met Bryks in May 1968, when Bryks came to the Gilmore residence in Montrose, Colorado, introducing himself as an agent for Constitution and offering to assist Gilmore in connection with his insurance needs. Specifically, Bryks at their first meeting in May 1968 advised Gilmore that if he paid his annual premium payment on the old Sterling policy at that time, instead of waiting till September 1968, he would be able to obtain the full maturity cash value of the policy in September 1968, even though the maturity date of the policy of the policy was September 1969. This was admittedly a false representation by Bryks. Gilmore, however, relied on Bryks' statement, and thereupon made out his personal check in favor of Constitution for the annual premium, otherwise due in September 1968, which he gave to Bryks. Bryks later endorsed this check on behalf of Constitution and deposited it in an account in the Cherry Creek National Bank, Denver, Colorado. This account plays a rather prominent role in this dispute, and brief reference thereto should be made at this point.

In April 1964 Constitution authorized Bryks, its general agent, to open an account in its name in the Cherry Creek National Bank, with Bryks having the authority to deposit in that account checks made payable to Constitution, and also having the authority to draw on the account, both on his sole signature. Accordingly, as previously mentioned, the premium check which Gilmore gave Bryks in May 1968 was deposited by Bryks in Constitution's account in the Cherry Creek National Bank. Gilmore also purchased a health and accident policy from Constitution through Bryks in September 1968, and the premium for this policy was paid for at that time by a check made payable to Constitution which Bryks deposited in Constitution's account in Cherry Creek National.

In September 1968 Bryks again journeyed to Montrose from Denver and presented Gilmore with a blank form for him to sign for the purpose of cashing in his old Sterling policy, which was now the obligation of Constitution. Gilmore signed the form in blank and gave it to Bryks to complete and transmit to Constitution. Gilmore anticipated, based on Bryks' representation, that he would receive in excess of $15,500 on the surrender of his policy, such being its full maturity value. However, when Bryks filled out the application form which Gilmore had signed in blank, the amount that was to be received was only $14,659.40, which was its value as of September 1968.

In due time Constitution prepared a check in the amount of $14,659.40 payable to Gilmore and gave the check to Bryks for delivery to Gilmore. Bryks, however, did not deliver the check to Gilmore, but forged Gilmore's endorsement and deposited it in the Cherry Creek National Bank account. Bryks then contacted Gilmore and persuaded Gilmore not to take the entire amount of his policy in cash, but to take $10,000 of these proceeds and buy a so-called 'certificate' which would draw 8% Interest. Gilmore agreed to this, and accepted a $10,000 certificate and a check for $5,569.30 for the balance due on the surrender of his Sterling policy, the total of these two amounts equalling the full maturity value of the policy. In buying the certificate Gilmore testified that he thought he was 'investing' or 'lending' to Constitution. It subsequently developed that these certificates were Bryks' own invention, and that Constitution had no knowledge of Bryks' activities in thus selling certificates, which he apparently sold not only to Gilmore, but to others as well.

In December 1968 Bryks suggested to Gilmore that he buy another $5000 certificate, which he did. And again, in June 1969, at Bryks' suggestion Gilmore bought another $5000 certificate. In each instance Gilmore paid for the certificate with a check made payable to Constitution, which Bryks then deposited in the Cherry Creek bank account.

Bryks paid Gilmore interest on these certificates commencing with the issuance of the first certificate and continuing through December 1971. During 1969, for example, Gilmore received $1400 as interest on the certificates, and at the end of 1969 he received in the mail a Form 1099 showing the amount of $1400 as interest for him to report on his income tax. This form was stamped in the 'By Whom Paid' blank with

'Constitution Life Insurance Co. Rocky Mountain States District Office 1637 Race Street Denver 6, Colorado.'

On October 29, 1971, Bryks wrote Gilmore and enclosed one certificate for $20,000, requesting that Gilmore return the three outstanding certificates, which totaled $20,000. This Gilmore did. As indicated, Bryks committed suicide in December 1971, and when the interest payments were no longer forthcoming, Gilmore contacted Constitution. The latter denied knowledge of its agent's fraud and disavowed liability on its part.

It was in this setting that Gilmore brought suit against Constitution, seeking to recover the $20,000 that he had given Bryks in return for the three certificates. Suit was brought in the District Court for Montrose County, State of Colorado, but was removed to the federal court by Constitution. At trial Gilmore did not, and could not, produce the first three certificates which he had purchased from Bryks. As indicated, these three had been surrendered to Bryks in return for the one $20,000 certificate. The latter certificate was produced upon trial. This fourth certificate made no reference, as such, to Constitution, but did recite that Gilmore had previously given Bryks $20,000 'towards our special fund on which we are paying 8% Interest per annum'. Gilmore had no recollection as to the exact language used in the first three certificates, though they were said to be similar in appearance to the fourth certificate. He did recall, however, that the first three certificates, unlike the fourth, were on Constitution's stationery and bore a Lawrence Street address in Chicago, Illinois.

Trial of this matter was to the court. After all the evidence was in, the trial court suggested to the parties that the evidence was not really in great dispute and directed counsel to draw up stipulated findings of fact. This was done, and such were then adopted by the trial court as its findings. As mentioned earlier, the trial court concluded that in selling the certificates to Gilmore, Bryks was acting within his apparent authority as a general agent for Constitution, and accordingly entered judgment for Gilmore against Constitution in the amount of $10,960.92 and costs. Gilmore's original claim had been reduced by the sum of $10,000 which he had received from Cherry Creek National Bank by way of settlement, the bank having previously accepted for deposit the check bearing Gilmore's forged endorsement. It is this judgment, which includes the two $5000 payments which Gilmore made in December 1968 and in June 1969 for so-called certificates, plus interest thereon, that Constitution now appeals.

As above indicated, at the conclusion of the trial the judge directed counsel to prepare a stipulated findings of fact. This counsel did, and the trial judge then accepted the stipulated findings as his own. However, the trial court then proceeded to make certain conclusions, which were in a sense ultimate mate findings of fact. It was in these conclusions that the trial...