Lear v. Equitable Life Assur. Soc. of U.S.

• Decision Date: 04 September 1986
• Docket Number: No. 85-1453,85-1453
• Citation: 798 F.2d 1128
• Parties: Elsie M. LEAR, Appellee, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1128

798 F.2d 1128

Elsie M. LEAR, Appellee, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, Appellant.

No. 85-1453.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 11, 1985.

Decided Aug. 8, 1986.

Rehearing Denied Sept. 4, 1986.

Austin Parham, Hannibal, Mo., for appellant.

Steven E. Raymond, Shelbyville, Mo., for appellee.

Before McMILLIAN, Circuit Judge, HENLEY, Senior Circuit Judge, and JOHN R. GIBSON, Circuit Judge.

HENLEY, Senior Circuit Judge.

Elsie M. Lear brought suit in a Missouri state court for fraudulent misrepresentation against The Equitable Life Assurance Society of the United States (Equitable), based on the statements of its agent, Denzil We reverse in part and remand for a redetermination of damages and the application of the statute of limitations.

D. David. Following removal to federal district court ¹ on the basis of diversity jurisdiction, a jury awarded Lear $214,000.00 actual damages and $200,000.00 punitive damages. Equitable appeals arguing that (1) Lear failed to establish David's agency and authority; (2) appellee did not prove the statute of limitations was satisfied and it was error not to instruct the jury on the statute; (3) a prior bankruptcy judgment against David was res judicata as to this case; (4) it was error to give a non-Missouri Approved Instruction on apparent authority; (5) the verdict director was incomplete; (6) deposition evidence was improperly admitted; (7) the parol evidence rule was violated; and (8) Lear failed to prove her damages.

BACKGROUND.

From January, 1973 to approximately September, 1975 Lear and her husband (now deceased) delivered checks totaling $125,000.00 to David which he was to invest in Equitable for a retirement annuity for the Lears. In exchange for their checks, which were made payable to David, the Lears were given documents entitled "Personal Notes." ² These notes, which were on one page each and either typewritten or in some cases handwritten, made no mention of Equitable, but rather stated that David would pay the Lears a certain amount of money the first of every month. ³ Lear testified that she believed David would deposit the money, purchase an annuity for the couple, and then upon receiving money from Equitable would mail the check to them. The couple did receive some payment checks from David, written on his personal account which listed both him and his wife as account holders. Unfortunately, he never remitted any money to Equitable.

The Lears' only prior dealing with David was in December, 1972 when they purchased an insurance policy on Mrs. Lear's life and an annuity from Equitable, both of which they cancelled. Lear testified that they cancelled these because as farmers they could not be assured of a regular income to make premium payments. As an alternative, David devised a single premium annuity which they could purchase when they had large sums of cash. This is what they believed they had purchased from Equitable.

The Lears never received any documents from Equitable or had any dealings with anyone other than David. The only thing they received with Equitable's name on it was David's business card. They never signed any applications or forms with Equitable, because David said he would do this for them. Lear did call the Hannibal, Missouri office to confirm that David worked there.

David used Equitable's office space, telephones, literature and secretarial services.

His employment contract (1) prohibited him from working for another insurance company; (2) required him to sell annuities; (3) allowed him to collect the first premium check in his own name; and (4) stated that he was to follow Equitable's rules and regulations. He was supervised by an agency manager and a district manager.

Prior to this case, Lear filed suit against David in Missouri state court. She eventually received a final judgment against him in bankruptcy court in the amount of $125,000.00 which he stipulated was nondischargeable. She did not receive any money from this judgment.

DISCUSSION.

(1) Agency Issues.

Appellant makes a series of arguments attacking Lear's case establishing David's agency and Equitable's liability. First, it argues that Lear did not prove that David was Equitable's agent and more specifically she did not demonstrate its right to control David. ⁴

These arguments are unpersuasive. We may only reverse a jury verdict, as Equitable has requested, when, viewing the evidence in a light most favorable to the verdict and giving the prevailing party the benefit of all reasonable inferences, no evidence of substance supports it. Smith v. Honeywell, Inc., 735 F.2d 1067, 1069 (8th Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 576, 83 L.Ed.2d 516 (1984). We believe the evidence was sufficient to support a finding of an agency relationship.

An agency relationship is created when "one person, the agent, consents with another, the principal, to act on behalf of the principal subject to the control of the principal." George v. Lemay Bank and Trust Co., 618 S.W.2d 671, 674 (Mo.Ct.App.1980). ⁵ The contracts between Equitable and David, especially the ones signed February 25, 1974 and October 1, 1966, call him "the agent" (except for one paragraph which states that he is an independent contractor free to make his own decisions), do not allow him to work for another insurance agency, place limits on his authority and state that he is subject to Equitable's rules and regulations. The testimony at trial also revealed that he was supervised by Equitable's officials. This evidence is sufficient to show that David consented to act on Equitable's behalf, subject to its control, and that he was not an independent contractor who worked according to his own methods. See id.

Equitable also argues that there is insufficient evidence proving David's authority to do his acts. ⁶

As to the first premium check given by the Lears we disagree. In this analysis we are mindful that our focus is not whether Equitable authorized the fraud which was perpetrated against Lear, but rather we examine the question whether it authorized the payment of monies to David. See Globe Indemnity Co. v. First National Bank in St. Louis, 133 S.W.2d 1066, 1071 (Mo.Ct.App.1939). In David's employment contracts, the first paragraph specifically lists the collection of first premium checks from annuity holders as one of the acts which the agent is authorized to do. From this we conclude that Equitable had given David express or actual authority, see Hyken As to the other checks written by the Lears, there is no such express authority. Therefore, we must consider whether there was apparent authority for David's acts. Apparent authority is created when a principal places an agent in such a situation or creates such an appearance that a third person reasonably and prudently believes the agent has the authority to act. Jefferson-Gravois Bank v. Cunningham, 674 S.W.2d 561, 563 (Mo.Ct.App.1984); Houston v. Groth Enterprises, Inc., 670 S.W.2d 178, 180 (Mo.Ct.App.1984).

v. Travelers Insurance Co., 678 S.W.2d 454, 457 (Mo.Ct.App.1984), to collect the Lears' first check dated January 10, 1973 for $25,000.00, and is therefore liable to Lear for this first misrepresentation.

Prior courses of dealings and similar transactions can create such a situation. See Jefferson-Gravois Bank, 674 S.W.2d at 563-64. Allowing David to collect the Lears' first check could be seen as creating apparent authority for the agent to collect all premium checks. However, we must focus not only on the acts of the principal but also on the question whether the Lears were acting reasonably and as persons of ordinary prudence. See Houston, 670 S.W.2d at 180.

In exchange for each of their checks the Lears signed with David what can only be described as personal notes ⁷. The notes do not state that David agreed to invest the money in Equitable but rather that he would pay them a fixed amount every month. The notes never, at any point, mention Equitable. They were not printed but were either typed or handwritten, were never more than one page in length, and could be easily read. As stated, the Lears never received any documents or applications of any sort from Equitable other than David's business card which he gave them. ⁸ Moreover, the checks they received from David did not appear to be drawn upon a business account, but rather were from his personal account which listed both him and his wife as account holders.

We appreciate the fact that the Lears were elderly and in somewhat poor health at the time of these transactions. However, the totality of the evidence, especially the personal notes, leads us to hold that an ordinarily reasonable and prudent person could not reasonably have believed that David had the apparent authority to collect the later premium checks.

Again, while we are mindful that it is for the jury and not us to evaluate and weigh the evidence, an examination of the record as a whole simply does not disclose the evidence of substance which is needed to support this jury verdict. See Sanders v. St. Louis County, 724 F.2d 665, 668 (8th Cir.1983). Since we have now found that Equitable could not be liable for more than the misrepresentations made in connection with the first check, this case will be remanded for a redetermination as to the amount of actual and punitive damages ⁹ for which Equitable is or may be liable. ¹⁰

(2) Statute of Limitations Issues.

Appellant next raises arguments dealing with the statute of limitations. Equitable contends that as a matter of law we should find that Lear did not prove this action was brought within the applicable statute of limitations period, and that the district court erred in not instructing the jury on the statute.

At trial Equitable did not request a specific written instruction dealing with the We note that Fed.R.Civ.P. 51 allows a party to file a request that the court instruct the jury on a particular...