Hutson v. Wenatchee Federal Sav. and Loan Ass'n

• Decision Date: 05 December 1978
• Docket Number: No. 2555-III,2555-III
• Citation: 22 Wn.App. 91,588 P.2d 1192
• Parties: Joyce Marie HUTSON, Individually and Joyce Marie Hutson, as Personal Representative of the Estate of Larry Russell Hutson, Deceased, Appellant, v. WENATCHEE FEDERAL SAVINGS AND LOAN ASSOCIATION, a/k/a Columbia Federal Savings and Loan Association, Respondent.
• Court: Washington Court of Appeals

Page 91

22 Wn.App. 91

588 P.2d 1192

Joyce Marie HUTSON, Individually and Joyce Marie Hutson, as Personal Representative of the Estate of Larry Russell Hutson, Deceased, Appellant, v.WENATCHEE FEDERAL SAVINGS AND LOAN ASSOCIATION, a/k/a Columbia Federal Savings and Loan Association, Respondent.

No. 2555-III.

Court of Appeals of Washington, Division 3, Panel Four.

Dec. 5, 1978.

Rehearing Denied Jan. 9, 1979.

[588 P.2d 1193] Rodney M. Reinbold, Okanogan, for appellant.

Davis, Arneil, Dorsey, Kight & Parlette, Robert L. Parlette, Wenatchee, for respondent.

ROE, Judge.

PlaintiffJoyce Hutson and her husband Larry approached defendantWenatchee Federal Savings and Loan Association originally for a home improvement loan, but decided to construct a new home instead when defendant's employee, Mr. Graff, suggested that that would be easier to finance.Having obtained a house plan, they returned to apply for the loan in September of 1971.The loan transaction proceeded smoothly enough; the money was lent and the house was built.

This lawsuit arose when an unfortunate accident killed Larry Hutson in November of 1972.Plaintiff alleged that Mr. Graff's words and conduct had created an implied contract that defendant would procure "credit life insurance" on Larry Hutson's life, but none was obtained.(Credit life insurance would pay the balance of the mortgage if the mortgagor should die.)The bank procured only "mortgage insurance."(Mortgage insurance, as the term is used in the savings and loan industry, only insures the lender; the insurer will pay the lender and take on the burden of foreclosing on the debt should the borrower default.)The parties' testimony diverges sharply, however, on what was said about credit life insurance.PlaintiffJoyce Hutson¹ claims that she asked for credit life insurance on her husband's life "in case something happened to the breadwinner"; defendant disputes that she clearly indicated what she wanted.Plaintiff also claims that Mr. Graff never told her what mortgage insurance is, and Mr. Graff asserts that he did.When plaintiff saw she was paying for mortgage insurance, she claims that she believed it was credit life insurance and that defendant never explained that it was anything else.

Plaintiff sought recovery under two separate but interrelated theories.First, as has been stated, she claimed that defendant, through its employee Mr. Graff, had impliedly agreed to procure credit life insurance for her protection.Thus, she claimed that defendant's failure to procure credit life insurance was a breach of the implied contract, for which she is entitled to recover damages.The trial court refused to submit this theory of recovery to the jury.Second, plaintiff claimed that defendant had a duty to define for her the term "mortgage insurance."She alleged that defendant did not define it, and that such failure constituted negligence.The trial court instructed the jury on negligent misrepresentation, but also instructed that defendant had no duty to define the term.This appeal followed the jury's verdict that defendant was not negligent.Plaintiff raises numerous assignments of error which we discuss under these two theories of recovery.

IMPLIED CONTRACT THEORY

Plaintiff's first alleged ground of error is that the trial court refused to instruct the jury on her theory of implied contract.In effect, the court's refusal operated as a ruling that plaintiff had not presented enough evidence to withstand a motion to dismiss this claim for insufficient evidence.In such a case,

the plaintiff's evidence and reasonable inferences therefrom must be construed in the light most favorable to the plaintiff.Construing plaintiff's evidence in this manner, our inquiry then is whether it provided a basis on which the jury, reasonably, rationally, and logically, might have found for the plaintiff: that is, that the parties had entered into a contract.

Gaasland Co. v. Hyak Lbr. & Millwork, Inc., 42 Wash.2d 705, 706, 257 P.2d 784(1953).In short, the question is whether plaintiff made a prima facie case of implied contract.

Plaintiff testified that when she applied for the loan at defendant's office she spoke with Mr. Graff,

and at that time we asked for insurance In case something happened to the breadwinner, and in turn Mr. Graff said that they had available life insurance and disability insurance and he did some figuring and then he told me that with the HOAP ² program we had to be within a percentage basis in order to qualify.

(Italics ours.)She stated that Mr. Graff, after consulting his rate books, told her that life and disability premiums together would take her above the maximum debt limits for the loan.

At this time we told him we were not interested in disability insurance at all, that we wanted the life insurance.And so then he proceeded to take out his books again, evidently to look up the premium, the monthly premium, and after some time of figuring he said that he had it, he said, (")I have got it, (") so we assumed then, that he had figured in the life insurance along with our other installments and what have you.

Plaintiff also points to the loan application form (Ex. 1), prepared by defendant, which stated that $39.22 (a handwritten figure) per month is to be paid "for taxes, fire insurance, assessments, And life insurance . . . "(Italics ours.)Plaintiff claims that she relied upon the above exchange with Mr. Graff and upon the language in the loan application, and that she reasonably believed that Mr. Graff, as defendant's agent, had agreed to procure credit life insurance on her husband's life for this debt.Plaintiff also alleged, and defendant did not dispute, that she and her husband had obtained credit life insurance on every other installment debt they had, including their account at Montgomery Ward's.She also stated that when she received various forms and notices from the defendant which showed that she was paying a $210 per year premium for "mortgage insurance,"she believed this in fact referred to credit life insurance.She claimed that Mr. Graff never explained to her what mortgage insurance is and that it is not life insurance.

We believe that this evidence was sufficient, as a matter of law, to establish a prima facie case of implied contract sufficient to take the case to the jury.

Acceptance of an offer may be implied from conduct as well as from words.

DeBritz v. Sylvia, 21 Wash.2d 317, 321, 150 P.2d 978, 980(1944).Justice Holmes's classic statement is relevant here:

To lead a person reasonably to suppose that you assent to an oral arrangement is to assent to it, wholly irrespective of fraud.

O'Donnell v. Clinton, 145 Mass. 461, 463, 14 N.E. 747, 751(1888).This is not to say that defendant cannot possibly counter or overcome plaintiff's claims with proof of its own.In fact, defendant sharply disputed certain elements of plaintiff's testimony.What we hold is that a legitimate issue was presented for resolution by the trier of fact.SeeGaasland Co. v. Hyak Lbr. & Millwork, Inc., supra.

Plaintiff further alleges that it was error for the trial court to give its instructions Nos. 14, 15, 16, 17, and 18.These instructions as a group restate some of Washington's statutory law respecting life insurance: that a written application is required; ³ that, to act as an insurer, one needs a certificate of authority from the insurance commissioner- ; ⁴ that certain formalities are required; ⁵ that the policy must be delivered to the insured; ⁶ and that a writing is required, so that an oral binder cannot require an insurer to issue a life insurance policy.⁷

Plaintiff never alleged that in fact a life insurance contract had been formed; rather, she alleged that the defendant had impliedly contracted to Procure credit life insurance for her on this debt.Defendant contends, with some justice, that these instructions, particularly instructions Nos. 14 and 17, are important because they shed light on the reasonableness and justifiability of plaintiff's reliance upon the alleged implied contract.Plaintiff apparently did have experience with both life insurance and credit life insurance on several occasions in the past; thus, her reliance is possibly less justifiable because the same procedures that she had been through with respect to prior insurance had not been followed in this case.Plaintiff responds, however, that the prejudicial impact of these instructions outweighs their power of clarification.We agree.Since plaintiff does not claim that an insurance contract actually was formed, the instructions spelling out the statutory requirements are much more likely to cause the jury to conclude that plaintiff's theory presents a legal impossibility.Such instructions add nothing to clarify the law surrounding plaintiff's actual contention that an Implied contract to Procure life insurance had been formed, and failure to give them would in no way deprive defendant of its theory that plaintiff's reliance was unjustifiable.On balance, we believe that these instructions were prejudicial.

Following its set of instructions on life insurance statutory law, the court also instructed the jury ⁸ that plaintiff must be presumed to know the law.The court did not instruct that the presumption could be rebutted.This instruction essentially told the jury that plaintiff's initial reliance upon defendant to procure credit life insurance for her was unjustifiable because she never filled out an application, and this became even more unjustifiable when the other statutory requirement of delivery remained unfulfilled.

The presumption that people know the law most frequently applies to criminal cases; it is more properly stated that one may not escape criminal liability by claiming ignorance of the law.In the civil area, most cases wherein the presumption is applied concern dealings with a governmental entity such as a municipal corporation, E. g., State...