Morton v. Amos-Lee Securities, Inc.
| Citation | 466 S.E.2d 542,195 W.Va. 691 |
| Decision Date | 14 December 1995 |
| Docket Number | AMOS-LEE,No. 22873,22873 |
| Court | Supreme Court of West Virginia |
| Parties | Mark E. MORTON, Executor of the Estate of Joseph R. Fitzpatrick, Plaintiff Below, Appellant, v.SECURITIES, INC., a Corporation; Richard L. Keagy, an Individual; and the Equitable Life Assurance Society of the United States, a Corporation, Defendants Below, Appellees. |
2. Syllabus Point 5, Jividen v. Law, 194 W.Va. 705, 461 S.E.2d 451 (1995).
Appeal from the Circuit Court of Kanawha County, Honorable A. Andrew MacQueen, Judge, Civil Action No. 89-C-1662.
J. Michael Ranson, Cynthia M. Salmons, William W. Smith, Charleston, for Appellant.
John M. Slack, III, Michael T. Cimino, Jackson & Kelly, Charleston, for Equitable.
INTRODUCTION
The appellant, Mark E. Morton, Executor of the Estate of Joseph R. Fitzpatrick, appeals a summary judgment entered by the Circuit Court of Kanawha County which held that there were no genuine issues of material fact and that from the pleadings, exhibits, memoranda and supporting documents, The Equitable Life Assurance Society of the United States (herein "Equitable") was entitled as a matter of law to judgment in its favor. Because we find, after reviewing the entire record, genuine issues of material fact exist that would support at least one of the legal theories of recovery advanced by the appellant, we reverse.
The appellant's decedent, Joseph R. Fitzpatrick, was by trade a salesman employed by a Charleston men's clothing store. Mr. Fitzpatrick had no background, training, education or experience in the world of acquisition, trading and sale of securities or other financial products. In the parlance of the investment community, he was an "unsophisticated investor."
In 1984, Mr. Fitzpatrick had the good fortune of inheriting a portfolio of investment grade securities with a market value of approximately $108,000. Lacking any understanding as to how to manage this windfall, Mr. Fitzpatrick sought, upon the recommendation of a friend, investment counselling and advice from Richard Keagy, an employee of Amos-Lee Securities, Inc. (herein "Amos-Lee"). 2
As time progressed and with the advice of Mr. Keagy, Mr. Fitzpatrick liquidated his entire portfolio, producing a sum of money in the amount of approximately $116,000. The conversion of the stock to cash was completed in early 1987.
During the period that Mr. Fitzpatrick was liquidating his inherited portfolio, he was admitted as an in-patient in a Charleston area hospital for an alcohol detoxification program. The period of hospitalization was January 23, 1987, through February 20, 1987. Mr. Fitzpatrick's discharge records reveal Following Mr. Fitzpatrick's discharge from the detoxification program, he sought the advice of Mr. Keagy as to how to invest this sum of money in such a manner as to produce a stable monthly income to supplement his earnings as a clothing salesman. 3
[195 W.Va. 693] that he was diagnosed with "[m]ajor depressive disorder, recurrent" and "[c]hronic alcoholism."
On April 27, 1987, Mr. Fitzpatrick and Mr. Keagy met to consider an investment plan. Mr. Keagy recommended the purchase of a single-premium whole life insurance policy through Equitable. The investment scheme associated with the purchase of this type of life insurance would have enabled Mr. Fitzpatrick to borrow against the policy to obtain income during his lifetime and the balance due on the policy at the time of death would have been paid to a designated beneficiary. It was necessary for Mr. Fitzpatrick to complete an application on an Equitable form to determine his eligibility to purchase this type of policy. During the process of completing the form, Mr. Fitzpatrick informed Mr. Keagy that he had recently been discharged from an alcohol detoxification program. Upon receiving this information, Mr. Keagy contacted an unnamed individual at Equitable to determine whether Mr. Fitzpatrick's alcoholism would disqualify him from purchasing this type of policy. Mr. Keagy testified in a deposition that he was informed by Equitable that Mr. Fitzpatrick's alcoholism would disqualify him from purchasing this type of policy. 4
Undaunted, Mr. Keagy persisted in his attempt to sell Mr. Fitzpatrick some sort of financial product with the $116,000 that was at Mr. Keagy's disposal. Mr. Keagy then suggested that Mr. Fitzpatrick take out a single-premium whole life insurance policy on the life of a relative and Mr. Fitzpatrick's niece was suggested. Mr. Keagy informed Mr. Fitzpatrick that this scheme would generate approximately $715 per month, which convinced Mr. Fitzpatrick on April 27, 1987, to deliver $116,000 for the policy. Mr. Fitzpatrick's niece was required to undergo a physical examination in connection with the insurance application.
On May 27, 1987, in a meeting at the office of Joseph Funderburk, Equitable's agency manager in West Virginia, Mr. Fitzpatrick informed Mr. Keagy and Mr. Funderburk that he had changed his mind in regard to purchasing this life insurance policy on the life of his niece and he asked both Mr. Keagy and Mr. Funderburk for additional investment alternatives that would generate a stable monthly income. 5 In response to this request, Mr. Keagy and Mr. Funderburk recommended that Mr. Fitzpatrick purchase an annuity. Mr. Funderburk discussed four types of annuities, including a life annuity 6 In an effort to explain these various types of annuities to this unsophisticated investor, Mr. Funderburk produced a mortality table describing various monthly payments for a male whose date of birth was June 18, 1920, which was Mr. Fitzpatrick's date of birth.
[195 W.Va. 694] and three types of refund annuities. 7
It is significant to note that during the time preceding the selection by Mr. Fitzpatrick of any of the annuity options, Mr. Funderburk had actual knowledge that Mr. Fitzpatrick had been rejected for life insurance by Equitable because of Mr. Fitzpatrick's alcoholism. Specifically, Mr. Funderburk testified at a deposition on September 20, 1993, as follows:
Q. Did you know that [Mr. Fitzpatrick] had been turned down for life insurance by The Equitable?
A. Yes, I did.
Q. How did you know that?
A. I just knew that he was. I don't remember--I didn't have anything to do with the application or anything but I knew that he was turned down.
Q. You just don't recall how you knew that?
A. No. I'm sure that he told me or--
Q. Mr. Keagy may have told you?
A. Yes.
Q. Do you know why he was turned down?
A. Alcoholism.
Q. Do you know what alcoholism has to do with being turned down for life insurance with Equitable?
A. Yes.
Q. What does it have to do with it?
A. Anytime anyone has a prior history of alcoholism, you have to wait seven years before you are insurable again.
Q. Do you know why that is?
A. Well, they just want to make sure that the people stay off of the alcohol.
Q. Why is that?
A. Well, because if you go back on, it's going to be detrimental to your health.
Q. Did you ever recommend to Mr. Fitzpatrick that he have a physical prior to buying this annuity?
A. Why would I do that?
Q. I don't know. I'm just asking you if you did.
A. No.
Q. You don't have to have a physical to buy an annuity; is that correct?
A. That is correct.
During the May 27, 1987 meeting, Mr. Fitzpatrick chose the life annuity from the various annuity options and authorized the release of the $116,000 for the purchase of the life annuity that paid a monthly income of $1,083.50 for the remainder of his life.
In March 1988, Mr. Fitzpatrick was diagnosed with throat cancer. In May 1988, Mr. Fitzpatrick executed a new will, replacing his sister as executrix and beneficiary of his estate, with the appellant Mark Morton, the chief financial officer at his employment, as executor, and his sister as the primary beneficiary. Mr. Fitzpatrick died on November 5, 1988. 8
As we harvest the pleadings, the appellant's theories of recovery include misrepresentation and fraud, breach of the duty of good faith and fair dealing, and a violation of the West Virginia Unfair Trade Practices Act (herein "WVUTPA"), W.Va.Code 33-11-4(1)(a) (1985).
The underpinnings to support these separate theories flow from a common set of facts: 9
1. That prior to the sale of the life annuity, Equitable had actual knowledge that Mr. Fitzpatrick was a 67-year-old male with a history of alcoholism which was detrimental to his health (undisputed); 10
2. That prior to the sale of the life annuity, Equitable had actual knowledge that Mr. Fitzpatrick was a novice or "unsophisticated investor" (disputed);
3. That prior to the sale of the life annuity, Equitable knew that Mr. Fitzpatrick had to live at least ten years to recover the principal (undisputed);
4. That Equitable knew that there was a strong likelihood that a person of Mr. Fitzpatrick's age and health was unlikely to live for a sufficient period of time to make a life annuity a worthwhile investment, in that he only had a life expectancy of 1.8 years (disputed); 11
5. That Mr. Fitzpatrick's investment strategy was to apply the $116,000 in such a manner as to produce the maximum monthly...
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