Micale v. Bank One N.A. (Chicago)
| Decision Date | 10 August 2005 |
| Docket Number | No. Civ.A04CV00288EWNCBS.,Civ.A04CV00288EWNCBS. |
| Citation | 382 F.Supp.2d 1207 |
| Parties | Charles A. MICALE individually and as the Settlor on behalf of the Charles A. Micale Irrevocable Insurance Trusts for the benefit of his family members, Plaintiff, v. BANK ONE N.A. (CHICAGO); Bank One Trust Company, N.A.; Banc One Investment Advisors Corporation a Wholly Owned Subsidiary of Bank One NA; Banc One Securities Corporation; Bank One Insurance Agency, Inc. a Wholly Owned Subsidiary of Bank One NA; Bank One N.A. as Successor of the First National Bank of Chicago and; American National Bank and Trust Company of Chicago, Defendants. |
| Court | U.S. District Court — District of Colorado |
Michael S. Burg, David K. TeSelle, Burg, Simpson, Eldredge, Hersh & Jardine, P.C., Englewood, CO, for Plaintiff.
Jonathan William Rauchway, Gale Timothy Miller, William A. Bianco, Davis, Graham & Stubbs LLP, Denver, CO, for Defendants.
This is a breach of fiduciary duty and breach of contract case. Plaintiff and Counterclaim Defendant Charles A. Micale, individually and as Settlor on behalf of the Charles A. Micale Irrevocable Insurance Trusts for the benefits of his family members, and as trustee of the Charles A. Micale Revocable Trust (collectively "Plaintiff")1 alleges that Defendants and Counterclaim Plaintiffs, Bank One N.A. (Chicago), Bank One Trust Company, N.A., Banc One Investment Advisors Corporation, Banc One Securities Corporation, Banc One Insurance Agency, Inc., Bank One N.A. (Chicago) as successor of the First National Bank of Chicago, and American National Bank and Trust company of Chicago (collectively "Defendants") breached common law and statutory fiduciary duties, violated the Colorado Uniform Prudent Investor Act, failed to supervise, and breached the contracts between the parties. This matter is before the court on (1) Defendants' "Motion for Judgment on the Pleadings," filed August 26, 2004; (2) "Defendants' Motion for Summary Judgment," filed November 19, 2004; and (3) "Defendants' Motion to Strike the Bad Faith and Sham Affidavit of Charles A. Micale," filed January 10, 2005. Jurisdiction is based on diversity of citizenship 28 U.S.C. § 1332 (2005).
Plaintiff's claims in this case arise out of two life insurance trusts and one investment account. (Third Am. Compl. with Jury Demand ¶¶ 31-35 [filed 8/1/05] [hereinafter "Third Am. Compl."].) I address the facts related to the two life insurance trusts first, then I address the facts related to the investment account.
Plaintiff formed the "Charles A. Micale Irrevocable Life Insurance Trust" and the "Charles A. Micale Spouses Irrevocable Life Insurance Trust" in December 1991. (Br. in Supp. of Defs.' Mot. for Summ. J., Statement of Undisputed Material Facts ¶ 1 [filed Nov. 19, 2004] [hereinafter ]; Shortly thereafter, Plaintiff funded the two trusts by purchasing two life insurance policies — one for each trust. (Id., Statement of Undisputed Material Facts ¶ 2; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 2.) Massachusetts General Life Insurance Company, subsequently Conseco Life Insurance Company, issued the two policies (the "Conseco policies") insuring the life of Plaintiff. (Id.) Defendants were not involved in the formation of the trusts, or in the selection or purchase of the Conseco policies. (Id., Statement of Undisputed Material Facts ¶ 3; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 3.)
On May 9, 1995, Defendant American National Bank and Trust Company of Chicago, a predecessor to Defendant Bank One, became a co-trustee of each trust. (Id., Statement of Undisputed Material Facts ¶ 4; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 4.) Beginning in the mid-1990s, Defendants, its employees, and designees managed Plaintiff's investments and advised Plaintiff with regard to estate planning, later acting as trustee in this regard. By 1995, it was apparent to the parties that the Conseco policies required additional premium payments in order to perform as originally represented to Plaintiff. (Id., Statement of Undisputed Material Facts ¶ 5; deemed admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 5.)2
Plaintiff asserts that in 1999 Defendants represented to him that the policies would not last a lifetime and would continue for another ten to twenty years without additional funding Additionally, Plaintiff contends that Defendants, as trustee, represented to Plaintiff, as settlor, that they could extend the period of potential lapse from ten to twenty years to a longer period by borrowing against the policies and conservatively investing the proceeds to pay the premiums over time. In June 2000, Defendants, acting on behalf of the trusts, took out loans from Conseco against the cash values of the Conseco policies. (Defs.' Br., Statement of Undisputed Material Facts ¶ 6; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 6.) The loan proceeds were invested in mutual funds, which were held in the trusts. (Id.) Between June 2000 and December 2003, the mutual fund investments, made with the proceeds of the loans against the Conseco policies, declined in value. (Id., Statement of Undisputed Material Facts ¶ 7; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 7.)
In August 2002, Defendants received final notice that the Conseco policies would lapse without further premium payments. (Id., Statement of Undisputed Material Facts ¶ 8; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 8.) Upon receiving this notice, Defendants contacted Plaintiff to confirm this event. (Id.) Plaintiff did not advance additional premium payments to sustain the policies. (Id.) On September 1, 2002, the Conseco policies lapsed. (Id., Statement of Undisputed Material Facts ¶ 9; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 9.)
In 2003, Defendants decided to replace the Conseco policies and reimburse Plaintiff's trusts for the decline in value of the trust investments made with the proceeds from the loans on the lapsed Conseco policies. (Id., Statement of Undisputed Material Facts ¶ 10; admitted in part at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 10.)3 At Plaintiff's request, Defendants investigated the possibility of reinstating the Conseco policies. (Id., Statement of Undisputed Material Facts ¶ 11; admitted in part at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 11.) Plaintiff contends that he wanted the Conseco policies reinstated. (Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 10.) In support, Plaintiff cites his own affidavit at paragraph twenty-three. (Id., Ex. 1 ¶ 23 [Aff. of Pl.].) This denial is patently refuted by Plaintiff's own letter dated December 8, 2003, sixteen days before the new policies were purchased, wherein he states:
I suggest in picking a carrier, one they should not pick is [C]onseco, since that would violate their fiduciary responsibility. I am sure they have convinced the Micale family by their actions and communications that [C]onseco is a very bad financial risk, [T]ravelers is an alternative, of course which they have been working with.
(Defs.' Br., Ex. A-1, 3 [12/8/03 Letter from Plaintiff].)
Defendants, in consultation with the co-trustee and Plaintiff, secured two new insurance policies for the trusts with The Travelers Life and Annuity Company ("Travelers"). (Id., Statement of Undisputed Material Facts ¶ 12; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 12.) The two Travelers policies provide for the same amount of death benefit coverage — $2,000,000 per policy — as provided by the Conseco policies. (Id., Statement of Undisputed Material Facts ¶ 13; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 13.) Unlike the Conseco policies, Travelers guaranteed the death benefit in its policies. (Id., Statement of Undisputed Material Facts ¶ 14; admitted at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 14.) In other words, as long as the insured paid the annual premiums, Travelers would pay the death benefit in full. (Id.) By contrast, the Conseco policies would terminate when Plaintiff reached the age of seventy-seven, irrespective of whether the premiums were paid. (Id.) The annual premiums for the Travelers policies total $55,137, which is $7,827 less than the premiums for each Conseco policy would have been if there was never a loan out on the Conseco policies and those policies had never lapsed.
Defendants contend that they replaced the cash values in each trust to the same amount it would be if the Conseco policies were still in force and Defendants never took loans against the Conseco policies or made the subsequent investments. (Id., Statement of Undisputed Material Facts ¶ 16; denied at Pl.'s Resp., Resp. to Statement of Undisputed Facts ¶ 16.) Plaintiff asserts that "[i]n 2003, the bank replaced the lapsed policies but now refuses to fund them for the same time period they had represented to me they would last, had they not borrowed against the policy and allowed the...
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