Security Life Insurance Company of America v. Jennings, Civ. A. No. 1841-N.
| Decision Date | 31 December 1963 |
| Docket Number | Civ. A. No. 1841-N. |
| Parties | SECURITY LIFE INSURANCE COMPANY OF AMERICA, Plaintiff, v. W. C. JENNINGS, Defendant. |
| Court | U.S. District Court — Middle District of Alabama |
Jack Crenshaw, Montgomery, Ala., for plaintiff.
M. R. Nachman, Jr., of Steiner, Crum & Baker, and Walter Knabe, Montgomery, Ala., for defendant.
This cause was submitted to the Court without a jury on the issues as made up by the pleadings and the proof. Upon consideration of this evidence, consisting of the testimony, both oral and by deposition, of the several witnesses, together with the numerous exhibits thereto, this Court now proceeds to make and enter the appropriate findings of fact and conclusions of law, embodying the same in this memorandum opinion.
On November 11, 1960, Security Life Insurance Company of America, acting through its president and principal stockholder, Frank Leu, purchased from the defendant, W. C. Jennings, a certain piece of property located at 400 Lee Street, Montgomery, Alabama, on which there was a building leased at that time to the General Services Administration of the United States and occupied by the Regional Office of the Veterans Administration. As the purchase papers recited, this lease expired on June 30, 1962, and the United States had an option under the lease to renew same for an additional period of five years. The execution of the purchase papers was the culmination of negotiations between Security Life Insurance Company's president, Frank Leu, and the defendant Jennings which began in early 1960.
As this Court's pretrial order recites, Security Life Insurance Company claims fraud of the defendant Jennings in the sale of this property to Security. The sale of the property, as the documents that were executed between the parties reflect, was for the sum of $900,000.00, $405,412.88 of which was represented by Security's assuming certain mortgages, the balance being represented by a note executed to the defendant Jennings in the sum of $494,587.12, said note being payable in accordance with an agreement between Security and Jennings that was dated November 11, 1960; the note was secured by a subordinate mortgage on the transferred property. The balance due Jennings was to be paid by an arrangement whereby Jennings was to secure single premium life insurance policies with Security as insurer, and the net premiums would be credited against the balance due Jennings.
The plaintiff, Security, says that the defendant's fraud was in the inducement in that W. C. Jennings induced the plaintiff, who was at all times material to this litigation acting through its president, Frank Leu, to purchase this property; that said inducement was in breach of a confidential and fiduciary relationship which existed between Jennings and Leu, who was acting for the plaintiff; that said breach grew out of the suppression and concealment from the plaintiff of the material fact that prior to the sale the defendant Jennings had sought and failed to secure a renewal or extension from the United States Government of the lease on the property which called for a rental of $179,000.00 per annum. Plaintiff Security says that in purchasing the property in question it relied upon this confidential and fiduciary relationship which existed between Jennings and Leu and relied upon the concealment and misrepresentation of this material fact by Jennings.
The second theory upon which the plaintiff bases its case is that the defendant Jennings misrepresented to Security a material fact, which misrepresentation was made wilfully to deceive and which misrepresentation was acted upon by the plaintiff Security, said misrepresentation being "that the defendant had no knowledge of any reason why said lease would not be renewed."
The third theory upon which the plaintiff asks this Court to give it relief is that the defendant Jennings misrepresented a material fact, upon which misrepresentation the plaintiff acted, in that defendant induced "the plaintiff to believe" that the lease would continue beyond June 30, 1962, and would be renewed and extended. The plaintiff asks this Court to:
Defendant Jennings pleads the general issue. As recited in the pretrial order of this Court made and entered herein on October 12, 1962, this general issue plea includes a specific denial of any misrepresentation, any intent to deceive, any fraudulent inducements, and a further specific denial of any confidential and fiduciary relationship between Jennings and Leu that may have related to the sale of the property involved. In addition to this general plea, the defendant Jennings pleads specially that Security's causes of action are separately and severally barred by the statute of limitations of one year as that statute is set out in Title 7, § 42, Code of Alabama, 1940, as revised. The defendant Jennings further says that each cause of action relied upon by Security is barred by laches, of which Security has been guilty.
Jennings counterclaims by asking this Court to require Security to specifically perform its obligations as reflected by the note and contract between the parties, both of which were dated November 11, 1960, and further claims of Security for Security's breach of the contract of November 11, 1960, by Security's failing and refusing to issue policies of insurance upon applications from Jennings and failing and refusing to make payments of interest and/or principal on the note in question. Jennings says that he has been damaged as the proximate consequence of Security's breach of contract in the amount of $75,000.00. For his second counterclaim, defendant Jennings claims of Security interest on the note dated August 1, 1960.
To each of these counterclaims separately and severally, Security pleads the general issue and pleads specially a "setoff" in that Jennings collected approximately $45,000.00 in rents on the property in question, which rents plaintiff was entitled to collect, and that the plaintiff is entitled to set off that amount against any interest or damages that may be due Jennings.
The evidence in this case reflects that, at the suggestion of and for the convenience of Security, the purchase was backdated to August 1, 1960. As a result of this backdating, Jennings had collected rent from the Government for the period from August 1 to November 11, 1960, which, according to the agreement between the parties, belonged to Security; out of this rent money that Jennings collected he paid operating expenses, interest to prior mortgagees, and other items which were, according to the contract between the parties, the obligation of Security after August 1, 1960.
Security has never paid any interest to Jennings and has recognized only six of the seven single premium policies written by Jennings. Security has announced that it will not pay interest to Jennings and that it will not recognize or issue additional policies.
The evidence as presented to this Court further reflects that in the spring of 1961 the Government, acting through the General Services Administration, made known publicly that it would seek bids for the construction of a building to be located in Montgomery, Alabama, and to house the Veterans Administration Regional Office. At this same time, the General Services Administration still had under consideration the retention of the 400 Lee Street Building as an alternative plan.
From the spring of 1961 until the summer of 1962, Security, acting through its president, Leu, and acting through Congressman Sikes of Florida, actively sought to work out a satisfactory arrangement with the Government whereby the Veterans Administration would continue to occupy the building in question. When it was unable to do so (and not until it was unable to do so), Security brought this action to abrogate its agreement with the defendant Jennings. The contention by Security in this case that Jennings knew at all times that the Government intended to vacate the building in question at the expiration of its current lease is contrary to the overwhelming evidence in this case. The contention on the part of Security that its president, Frank Leu, relied entirely upon what Jennings told him and made no investigation as to whether the Government would renew the lease in question before Security purchased the building is absolutely contrary to the evidence in this case. As a matter of fact, the evidence reflects that Leu was and is an experienced businessman who owned over ninety per cent of the stock in a $15,000,000.00 insurance company, who organized...
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SECURITY LIFE INSURANCE COMPANY OF AMERICA v. Jennings
...this diversity case the findings and conclusions of the district court are set forth in its opinion in Security Life Insurance Company of America v. W. C. Jennings, D.C., 250 F.Supp. 164. It is our view that the correct result was reached by the district court and, therefore, its judgment A......