PRINCIPAL LIFE INS. v. SUMMIT WELL SERVICE, No. 01-183

• Decision Date: 22 November 2002
• Docket Number: No. 01-184., No. 01-183
• Parties: PRINCIPAL LIFE INSURANCE COMPANY, Appellant (Third Party Defendant), v. SUMMIT WELL SERVICE, INC., a corporation; Ann P. Allen, in her capacity as the Personal Representative and Executrix of the Estate of Robert M. Allen, deceased; and Ann P. Allen, individually, Appellees (Defendants/Third Party Plaintiffs). Byron R. Woodard, Appellant (Plaintiff/Third Party Defendant), v. Principal Life Insurance Company, a corporation, Appellee (Third Party Defendant).
• Court: Wyoming Supreme Court

57 P.3d 1257

2002 WY 172

PRINCIPAL LIFE INSURANCE COMPANY, Appellant (Third Party Defendant), v. SUMMIT WELL SERVICE, INC., a corporation; Ann P. Allen, in her capacity as the Personal Representative and Executrix of the Estate of Robert M. Allen, deceased; and Ann P. Allen, individually, Appellees (Defendants/Third Party Plaintiffs).

Byron R. Woodard, Appellant (Plaintiff/Third Party Defendant), v. Principal Life Insurance Company, a corporation, Appellee (Third Party Defendant).

Nos. 01-183, 01-184.

Supreme Court of Wyoming.

November 22, 2002.

Rehearing Denied January 7, 2003.

Peter K. Michael of Peter K. Michael, P.C., Cheyenne, Wyoming, Representing Principal Life Insurance Company.

V. Anthony Vehar of Vehar Law Offices, P.C., Evanston, Wyoming, Representing Byron Woodard.

Ray G. Martineau, Anthony R. Martineau, and Brett D. Cragun of Salt Lake City, Utah, Representing Summit Well Service, Inc.

Before HILL, C.J., and GOLDEN, LEHMAN,¹ KITE, and VOIGT, JJ.

KITE, Justice.

[¶ 1] Upon the death of its insured, Robert Allen, Principal Life Insurance Company (Principal) delivered the proceeds under Mr. Allen's life insurance policy to his business associates, Brent Nelson and Byron Woodard. Ann Allen, Mr. Allen's widow, claims the delivery to Mr. Nelson and Mr. Woodard was improper and the insurance policy proceeds should have been paid to her. She contends Summit Well Service, Inc., a Utah corporation owned solely by her late husband, was the named beneficiary under the policy and she, as the only authorized representative of the corporation after her husband's death, was entitled to the policy proceeds. Principal argues delivery to Mr. Nelson and Mr. Woodard was proper because the named beneficiary under the policy was Summit Well Service (Summit), a partnership consisting of Mr. Allen, Mr. Woodard, and Mr. Nelson. After a bench trial, the trial court agreed with Mrs. Allen and ordered Principal to pay $1,516,046.74 (the amount of the policy plus interest, costs, and attorney's fees) to Mrs. Allen. We reverse and remand.

ISSUES

[¶ 2] Principal, as the appellant in Case No. 01-183, raises the following issues:

I. Whether the trial judge's conclusion that Principal breached the insurance contract was clearly erroneous[.]

II. Whether the claims against Principal were barred by W.S. § 26-15-102(d)[.]

III. Whether the claims against Principal were barred by equitable estoppel[.]

IV. Whether the claims against Principal were barred by ratification of the delivery of policy benefits[.]

V. Whether the third party plaintiffs were entitled to attorneys' fees and interest under W.S. § 26-15-124(c)[.]

VI. Whether the trial judge abused his discretion in awarding over $220,000 in attorneys' fees[.]

VII[]. Whether the trial judge abused his discretion in awarding costs[.]

Summit Well Service, Inc., an appellee in Case No. 01-183, lists the same issues in its brief.

[¶ 3] Mr. Woodard, the appellant in Case No. 01-184, presents the following issues:

A. Did the district court err in its interpretation of the written contract between Robert M. Allen and Appellant Byron R. Woodard?

B. Was the district court clearly erroneous in its finding that Appellant Woodard was guilty of intentional misrepresentation (deceit) in regard to the payment of death benefit proceeds by Principal Life Insurance Company to Summit Well Service by and through Brent Nelson?

Principal, as the appellee in Case No. 01-184, phrases the issues as:

I. Whether Principal had any liability to Third Party Plaintiff Summit Well Service, Inc. that would create a basis for the cross-claim against Woodard[.]

II. Whether Principal's cross-claim for indemnity could be based on fraud, as well as its other legal theories[.]

FACTS

[¶ 4] In 1997, Mr. Allen was the sole shareholder, officer, and director of three companies: Summit; Duel Production, Inc. (Duel); and Trans Pacific Investments, Inc., doing business as A.C.T. (A.C.T.). During that year, Mr. Allen was also involved in business dealings with Mr. Woodard and Mr. Nelson relating to the three companies. On July 2, 1997, in furtherance of their business dealings, Mr. Allen and Mr. Woodard and Mr. Allen and Mr. Nelson, respectively, entered into letter agreements intended to set out the parameters of their business relationships. In the letter agreements, Mr. Allen agreed to transfer a twenty percent interest in Summit, Duel, and A.C.T. to Mr. Woodard and a forty percent interest in those entities to Mr. Nelson. In return for receiving the equity interests, Mr. Woodard and Mr. Nelson agreed to operate and manage the businesses on a day-to-day basis.

[¶ 5] In September of 1997, Mr. Allen, Mr. Woodard, and Mr. Nelson applied with Principal for individual $1 million life insurance policies. The information provided to Principal when the applications were made showed Mr. Nelson and Mr. Allen were the owners of Summit and Mr. Woodard was an employee. All three applications listed Summit as "owner." The men submitted applications and authorization forms with their applications which were signed by Mr. Nelson as owner of the insurance.

[¶ 6] Initially, Mr. Allen and Mr. Nelson named their respective estates as beneficiaries under their policies, and Mr. Woodard named Summit as his beneficiary. After discussions between Principal's agents and Mr. Allen and Mr. Nelson, their policies were amended to name Summit as the beneficiary under their policies. The policies were issued with the amendments on January 28, 1998. Mr. Nelson's signature appears on the acknowledgement of delivery form as "contract owner." Insurance premiums for the policies were paid by checks signed by either Mr. Allen alone or Mr. Allen and Mr. Woodard jointly and issued from bank accounts in the name of Summit, A.C.T, or Duel. Three months after the insurance policies were issued, on April 24, 1998, Mr. Allen died in a motorcycle accident.

[¶ 7] On April 1, 1998, three weeks before Mr. Allen's death, the State of Utah involuntarily dissolved Summit Well Service, Inc. because it failed to file an annual report. There is no evidence in the record that, prior to Mr. Allen's death, any steps were taken to officially transfer ownership interests in Summit, Duel, or A.C.T. to Mr. Woodard or Mr. Nelson or to make them officers or directors. There also is no indication in the record of any formal partnership agreement other than the July 2, 1997, letter agreements, nor are there any other partnership records.

[¶ 8] After her husband's death, Mrs. Allen attempted to obtain a copy of the policy and a claim form from Principal. In making the request, Mrs. Allen informed Principal that her husband was the sole owner of Summit Well Service, Inc. and she was his personal representative. Mrs. Allen enclosed copies of the will appointing her personal representative of the estate and the stock purchase agreement reflecting her late husband's purchase of Summit Well Service, Inc. Principal denied Mrs. Allen's request for a copy of the policy and a claim form on the ground that she did not provide sufficient proof that she was an authorized representative of the policy owner or beneficiary. It did refer Mrs. Allen to claims specialist Mike Wagner who was investigating the claim, and he came to Wyoming to interview her. Mrs. Allen also informed Mr. Wagner during the interview that her husband was the sole owner and director of Summit Well Service, Inc. On May 22, 1998, Mrs. Allen filed an application for reinstatement of Summit Well Service, Inc., and the State of Utah granted the application.

[¶ 9] On June 15, 1998, Mr. Nelson submitted a claim for payment of benefits under the policy, listing himself as beneficiary and signing his name in the signature block. Upon receipt of his claim on June 26, 1998, Principal informed Mr. Nelson that he needed to submit a new claim listing Summit rather than himself as the beneficiary and signing as the authorized representative of the business. Mr. Nelson submitted a second claim form on June 30, 1998. Meanwhile, on June 19, 1998, Mr. Woodard and Mr. Nelson filed a complaint against Mrs. Allen, Summit, Duel, and A.C.T. alleging Mrs. Allen had assumed control of, and was refusing to recognize their interest in, the three businesses and she was attempting to bypass their interest in the insurance policy proceeds by having the benefits paid directly to her.

[¶ 10] On July 9, 1998, Principal issued a check in the amount of $1,008,370.41 (the policy proceeds plus interest) to Summit. The check was hand delivered to Mr. Woodard on July 10, 1998. It was deposited into a bank account in Utah, and the proceeds were later split between Mr. Woodard and Mr. Nelson.

[¶ 11] On the morning of July 10, 1998, prior to delivering the insurance proceeds to Mr. Woodard, Principal received a telephone call from Billie Crocker, counsel for Mrs. Allen. Jerry Mogenson, senior claim administrator, took the call and informed Ms. Crocker that he did not have sufficient documentation substantiating Mrs. Allen's status with Summit to allow him to release a copy of the policy and a claim form to her. Ms. Crocker indicated she would send additional documentation by facsimile. At 9:10 a.m., a facsimile arrived informing Principal that Mr. Nelson was terminated from his employment with Summit on May 6, 1998, and Mrs. Allen was the sole shareholder, president, and director. Attached to the facsimile were a letter from Mrs. Allen to Summit Well Service, Inc. directing the corporation to transfer all ownership to her as personal representative of the estate; a written consent in lieu of directors meeting executed by Mrs. Allen appointing herself director of the corporation; and a certificate of good standing for Summit Well Service, Inc. dated June 1, 1998, from the Utah Department of Commerce. Upon reviewing the documentation, Mr. Mogenson left a message for Ms. Crocker at 11:15 a.m. indicating he would send her a copy of the policy and a...