Seiders v. Hefner

• Jurisdiction: Oregon
• Parties: Page 1003 747 P.2d 1003 89 Or.App. 55 Evelyn SEIDERS, Respondent, v. Michael D. HEFNER, dba The Michael Hefner Group, Defendant, and USLIFE Life Insurance Company of California, Appellant. 8
• Citation: 89 Or.App. 55,747 P.2d 1003
• Court: Oregon Court of Appeals
• Decision Date: 23 December 1987

Page 1003

747 P.2d 1003

89 Or.App. 55

Evelyn SEIDERS, Respondent v Michael D. HEFNER, dba The Michael Hefner Group, Defendant and USLIFE Life Insurance Company of California, Appellant.

83-08-19,026-L; CA A38385.

Court of Appeals of Oregon.

Argued and Submitted Dec. 11, 1986.

Decided Dec. 23, 1987.

H. Clifford Looney, Vale, argued the cause for appellant.With him on the briefs was Butler & Looney, P.C., Vale.

Tim J. Helfrich, Ontario, argued the cause for respondent.With him on the brief was Yturri, Rose, Burnham, Ebert & Bentz, Ontario.

Before BUTTLER, P.J., and WARREN and ROSSMAN, JJ.

BUTTLER, Presiding Judge.

Plaintiff brought this action to recover damages allegedly arising out of defendants' breach of fiduciary duty and negligent entrustment of life insurance proceeds.Because defendant Hefner filed for bankruptcy, the action against him was stayed pending the outcome of the bankruptcy court proceeding, and the action proceeded against defendant USLIFE alone.The jury returned a verdict for general and punitive damages ¹ on both counts against USLIFE, which appeals from the resulting judgment.We affirm in part and reverse in part.

Plaintiff and her husband, Joe, operated a family farm in Harper.They were approached by Hefner, an independent insurance agent, in 1976 or 1977, about the purchase of life insurance policies, and each of them purchased a policy from USLIFE through Hefner.Hefner also counseled them on estate planning and referred them to an attorney, who prepared wills for them.Hefner maintained a friendly relationship with them, visiting them once or twice each year.In 1980, he ended his relationship with USLIFE.Plaintiff received no notice, and did not know, that that relationship had been terminated.

On August 18, 1981, Joe died.Plaintiff took Joe's USLIFE policy to a funeral home, and an employe of the home sent it to USLIFE on her behalf with a request for claim forms.She also called Hefner and told him that her husband had died; however, she did not ask him to help her obtain the proceeds of the policy.Even though he was no longer selling insurance for USLIFE, the company sent plaintiff's benefit check to Hefner, who called plaintiff and told her that he would deliver the check to her.When he did so, plaintiff believed that he was an agent of USLIFE.

The USLIFE employe who handled plaintiff's claim testified that the initial notification of Joe's death came from an employe of Hefner and that she had noted that Hefner was no longer selling USLIFE policies.She testified that USLIFE normally sends the checks representing the policy proceeds directly to the beneficiary when the agent who wrote the policy no longer represents the company and when the beneficiary had not authorized the company to send the proceeds to another person.Notwithstanding that general practice, USLIFE sent plaintiff's check to Hefner for delivery to her.

On September 24, 1981, Hefner drove from his office in Beaverton to Harper to deliver the check.At that time, plaintiff still considered him to be an agent of USLIFE.She confided to Hefner that her attorney had advised her to avoid putting all of the $100,000 proceeds in one investment.Hefner, after calling a bank in Vale, told plaintiff that the bank would pay 16.5 percent interest on her deposit.He then said that he would pay her 18 percent interest if she would loan him part of the money.He prepared and signed a promissory note for $40,000, with interest at the rate of 18 percent, and delivered it to plaintiff in return for a check for that amount.

Plaintiff knew that the loan was Hefner's personal obligation and that it was not guaranteed by USLIFE.Hefner did not suggest that the loan be secured, nor did he suggest that plaintiff seek independent financial advice.Plaintiff trusted Hefner because of their prior contacts and because USLIFE had trusted Hefner to deliver the benefit check.Hefner did not repay any of the borrowed money.

On appeal, defendant assigns error to the trial court's denial of its motion to dismiss both Counts I and II of the complaint, which was made before trial, again at the close of plaintiff's case and, finally, after all of the evidence was in.Count I alleges that both defendants were negligent and violated their fiduciary duty to plaintiff in certain particulars relating to the investment advice that Hefner gave her.²We are satisfied that the allegations state a claim for relief against USLIFE, assuming that Hefner was its agent in this matter, and that, as discussed below, the evidence was sufficient to submit Count I to the jury.

Count II alleges that USLIFE was negligent in entrusting life insurance proceeds to Hefner (a) without notifying plaintiff that he was no longer an agent of USLIFE, (b) without exercising any supervision or control over Hefner, and (c) without plaintiff's consent.Those allegations appear to make it clear that plaintiff relies solely on the alleged negligence of USLIFE in entrusting the proceeds to Hefner.Assuming that Count II states a claim, there is no evidence that USLIFE entrusted the proceeds to Hefner; it delivered a check to him for delivery to plaintiff, to whom the check was made payable, and he delivered it.Both parties appear to have treated Count II as alleging the negligent entrustment of the check rather than of the proceeds.Given that treatment by the parties and the evidence supporting it, plaintiff is not entitled to recover on Count II.Even if defendant was negligent in entrusting the check to Hefner, he delivered it to plaintiff; therefore, entrusting the check, even if negligent, did not cause plaintiff's damage.Count II should have been dismissed at the close of plaintiff's case.

Defendant's other assignments of error fall into three categories: First, the refusal to give a requested instruction and the giving of another instruction; second, sufficiency of the evidence to support the verdict; and, third, denial of its motion to withdraw punitive damages from the jury.

The trial court refused to give this instruction:

"I instruct you that the person who is an independent insurance agent or broker is the agent of the insured in negotiating for a policy."

Instead, the court instructed:

"The law of Oregon further provides that any person who solicits or procures an application for insurance shall, in all matters relating to the application for insurance and the policy issued in consequence of the application be regarded as the agent of the insurer issuing the policy, and not the agent of the insured.Any provisions in the application and policy to the contrary are invalid and of no effect whatever."

ORS 744.165 provides that the agent represents the insurer in all matters relating to the application for, and issuance of, the policy.The instruction given mirrors ORS 744.165 and is a correct statement of the law.The requested instruction is contrary to that statute, and the trial court properly refused to give it.

One of the main factual issues in this case was whether Hefner was acting as an agent of USLIFE when he delivered the check and procured the loan from plaintiff.USLIFE contended at trial that, because Hefner was an independent insurance broker, rather than a company agent, Hefner was an agent of the Seiderses, rather than USLIFE, when he obtained Joe's policy.Under ORS...