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

• Court: Missouri Court of Appeals
• Writing for the Court: Roy L. Richter
• Citation: Roth v. Equitable Life Assur. Soc. of U.S., 210 S.W.3d 253 (Mo. App. 2006)
• Decision Date: 17 October 2006
• Docket Number: No. ED 87148.,ED 87148.
• Parties: Michael J. ROTH, et al., Plaintiffs/Appellants, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, et al., Defendants/Respondents.

210 S.W.3d 253

Michael J. ROTH, et al., Plaintiffs/Appellants, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, et al., Defendants/Respondents.

No. ED 87148.

Missouri Court of Appeals, Eastern District, Division Five.

October 17, 2006.

Application for Transfer to Supreme Court Denied December 4, 2006.

Application for Transfer Denied January 30, 2007.

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Maurice B. Graham, Thomas K. Neill, St. Louis, MO, for appellant.

G. Carroll Stribling, St. Louis, MO, for respondent, AXA Equitable Life Ins. Co.

William J. Travis, Sandra B. Gallini, St. Louis, MO, for respondent, John Zeman.

ROY L. RICHTER, Judge.

Michael and Rosemary Roth (collectively "the Roths") together with Michael Waxenberg ("Waxenberg") in his capacity as trustee of the Roth Family Irrevocable Trust appeal the trial court's grant of summary judgment in favor of Equitable Life Assurance Society of the United States, AXA Advisors, LLC (together referred to as "AXA"), John Zeman ("Zeman"), and (AXA and Zeman collectively referred to as "Respondents"). We affirm.

Prior to the transactions giving rise to this action, the Roths had regularly invested in insurance, bonds, and brokerage accounts. In the 1990s, the Roths engaged in financial and estate planning. After consulting several insurance and investment representatives, the Roths contacted Zeman on the suggestion of their attorney, Michael Waxenberg, who had previously purchased a policy for himself from Respondents.

The Roths informed Zeman that their primary concern was to provide for their daughter, in addition to their retirement needs. They admitted that they knew that risk would be involved in order to meet their goal of increasing their $450,000 in savings to $1,000,000 in 10 years, and opted to invest accordingly. The Roths purchased five insurance and investment products, three "Accumulator" products and two variable life insurance products from Zeman, an agent for AXA and Equitable.

In November of 1999, the Roths purchased their first Accumulator product for $100,000. Within the Accumulator product, the Roths selected which investments their payments would go towards. The selections were made from among thirty funds available. The Roths were supplied with a prospectus detailing the performance of each fund, as well as what securities were contained in each, before making their selections. In selecting their allocations, they also checked the box for special dollar cost averaging. The certificate summary the Roths received, stated that "[t]hrough a systematic approach to investing, commonly referred to as Dollar Cost Averaging, you can gradually invest in the market and may actually reduce your average cost over time." (emphasis added)

In January of 2000, the Roths purchased another Accumulator product for $200,000. This contract asked whether the Roths had received the Equitable Accumulator prospectus. The Roths marked yes, indicating that they had received the prospectus in October, 1999 (which was a date prior to the purchase of the first Accumulator in November of 1999), and made their investment selections. Another Accumulator policy was purchased in January of 2000, with the Roths once again making the selection of investment options.

The Roths also purchased two variable life insurance policies. One had a face amount of $1,500,000, with a planned annual premium of $5,500 payable quarterly. The policy information the Roths received describes the terms of the variable life insurance policy and stated that "[t]he portion of your policy that is in an investment fund [may] vary up or down depending on the unit value of such investment fund, which in turn depends on the investment performance of the securities held by that fund." The Roths opted to invest in various funds, as well as other options when they purchased another Variable Life Insurance policy.

The Roths were provided with literature explaining and detailing those products, as well as the securities that comprised them. The Roths signed documentation specifically acknowledging that they had received prospectuses concerning the products being purchased, and were familiar with them.

Subsequent to their purchases the market declined. In their depositions, the Roths admitted that they failed to adequately read, or did not read the prospectuses, applications, contracts or policies prior to, or after, applying for and accepting the products they purchased. Further, Mr. Roth admitted that he and his wife failed to do their "due diligence" prior to purchasing the various products.

In 2002, the Roths sent a letter of complaint to the Missouri Department of Insurance and eventually filed a twenty-two count petition against Respondents, citing various theories of recovery, including: fraudulent misrepresentation, fraudulent concealment, fraud — a promise without a present intent to perform, negligence, negligent misrepresentation, breach of fiduciary duty, breach of contract, promissory estoppel, negligent supervision, and punitive damages. Thereafter, Respondents filed a motion for summary judgment alleging the Roths were provided with sufficient information to make their decisions and that no material facts were in dispute. The trial court granted Respondents' motion for summary judgment. This appeal follows.

In an appeal of summary judgment, we review the record in the light most favorable to the party against whom the judgment was entered. ITT Commercial Finance v. Mid-America Marine, 854 S.W.2d 371, 376 (Mo. banc 1993). We accord the party against whom summary judgment was entered the benefit of every doubt. Green v. Washington University Medical Center, 761 S.W.2d 688, 689 (Mo. App. E.D.1988). Appellate review of the grant of summary judgment is purely a question of law and, hence, employs the same criteria as imposed by the trial court in its initial determination of the propriety of the motion. ITT Commercial Finance, 854 S.W.2d at 376. A de novo standard is employed. Id. We address each count of the Roths' appeal, which mirror the claims set out in their petition.

On the claim of fraudulent misrepresentation: The elements of fraudulent misrepresentation are: (1) a false, material representation, (2) the speaker's knowledge of its falsity or his ignorance of the truth, (3) the speaker's intent that the hearer act upon the representation in a manner reasonably contemplated, (4) the hearer's ignorance of the falsity of the representation, (5) the hearer's reliance on its truth, (6) the hearer's right to rely thereon, and (7) the hearer's consequent and proximately caused injury. Urologic Surgeons, Inc. v. Bullock, 117 S.W.3d 722 (Mo.App. E.D.2003). Recovery for fraudulent misrepresentation is not possible if the moving party fails to establish any one of the elements. Id. at page 726. While estimates may have been offered over the course of Respondents' conferring with the Roths, the estimates were coupled with recommendations that the Roths seek outside counsel and review the prospectuses before choosing to invest. The prospectuses clearly warn of the risks involved in investing in the stock market. Respondents' recommendations were for the Roths to seek advice beyond that of Respondents. In essence, they advised the Roths to seek a second opinion before purchasing. The record shows that the Roths were accompanied by Waxenburg and their Accountant at one of the meetings with Zeman. Although the Roths were provided with documentation warning them of the risks in investing, the Roths failed to read the literature provided. As a result, claims of fraudulent misrepresentation fail.

On the claim of fraudulent concealment. According to section 516.280 RSMo 2000, and in line with the case of Batek v. Curators of University of Missouri, 920 S.W.2d 895 (Mo.1996), the plaintiff must plead the elements of fraudulent concealment. These elements are:

(1) Defendant did or failed to do something that caused the injury;

(2) Defendant's conduct failed to meet the required standards of professional competence and was therefore negligent;

(3) Defendant had actual knowledge that he or she caused the injury;

(4) With that knowledge the defendant intended by post-injury conduct and statements to conceal from the patient the existence of a claim for malpractice;

(5) Defendant's acts were fraudulent; and

(6) Plaintiff was not guilty of a lack of diligence in sooner ascertaining the truth.

Further, the crux of a fraudulent concealment cause of action is that "defendant, by his or her post-negligence conduct, affirmatively intends to conceal from plaintiff the fact that the plaintiff has a claim against the defendant." Id. at page 900.

Each of the Respondents provided the Roths with the information explaining that investment vehicles inextricably bound to a market had a historical propensity to fluctuate. The standard of professional competence was met by Respondents disclosing the information they had, and by their encouragement of the Roths to seek outside advice before investing. Here, the Roths cannot establish that Respondents did or failed to do something that caused their injury. Further, no Respondent sought to deprive the Roths of their right to seek judicial redress. No overtures were made to conceal from the Roths their legal rights. The Roths admitted their failure to exercise due diligence in thoroughly reading the materials Respondents supplied to them before making the decision to invest. As a result, the Roths' fraudulent concealment claims fail.

On the claim of fraud based on a promise without a present intent to perform. "It is well-settled that an unkept promise does not constitute actionable fraud unless it is accompanied by a present intent not to perform, in which case it constitutes a misrepresentation of a present state of mind — itself an existent fact." Thoroughbred Ford, Inc. v. Ford Motor Company, 908 S.W.2d...