Shupak v. New York Life Ins. Co.

• Decision Date: 05 March 1991
• Docket Number: No. CV 89-88-BLG-JFB.,CV 89-88-BLG-JFB.
• Citation: 780 F. Supp. 1328
• Parties: Thomas SHUPAK, Wilma Shupak, and Steven Shupak, Plaintiffs, v. NEW YORK LIFE INSURANCE COMPANY, and New York Life Annuity Corporation, Defendants.
• Court: U.S. District Court — District of Montana

780 F. Supp. 1328

Thomas SHUPAK, Wilma Shupak, and Steven Shupak, Plaintiffs, v. NEW YORK LIFE INSURANCE COMPANY, and New York Life Annuity Corporation, Defendants.

No. CV 89-88-BLG-JFB.

United States District Court, D. Montana, Billings Division.

March 5, 1991.

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Steve Reida, Landoe, Brown, Planalp & Kommers, Bozeman, Mont., for plaintiffs.

Peter F. Habein, Crowley Law Firm, Billings, Mont., for defendant.

MEMORANDUM OPINION AND ORDER

BATTIN, Senior District Judge.

Presently pending before the Court are (1) defendant New York Life Insurance Company's Motion for Summary Judgment; and (2) Plaintiffs' Motion to Compel. For the reasons stated below, the motions are granted and denied as follows.

I. Defendant's Motion for Summary Judgment

FACTS AND PROCEDURAL BACKGROUND

Plaintiffs filed this action asserting various claims arising out of their purchase of several life insurance and annuity policies from defendant New York Life Insurance Company ("New York Life)".¹ Plaintiffs allege that Harold Schwan ("Schwan"), an agent of New York Life, (1) made misrepresentations to them concerning the rate of return and benefits, of the policies to induce their purchase in 1983; (2) made unauthorized policy purchases for them; (3) commingled the plaintiffs' policyholder payments with his personal funds; (4) forged an endorsement on a check payable to plaintiff Wilma Shupak in 1985 and converted the proceeds thereof; (5) misapplied a $20,000.00 payment made by plaintiff Wilma Shupak in 1985, and converted a portion of that payment to his own personal use; (6) changed plaintiff's address on company records from July, 1985 through August, 1986, so that plaintiffs would not receive notices regarding the status of their policies; and (7) failed to deliver purchased policies to them. Plaintiffs seek to hold New York Life vicariously liable for Schwan's acts, and also seek to hold New York Life directly liable, based upon its failure to investigate Schwan's handling of plaintiffs' policies and to implement an adequate management system to monitor the conduct of its agents or to otherwise protect plaintiffs. Specifically, plaintiffs assert claims for:

Count I: Negligent misrepresentation

Count II: Fraud and conversion

Count III: Montana Insurance Code violations

Count IV: Negligence and breach of fiduciary duty

Count V: Breach of the implied covenant of good faith and fair dealing

Count VI: Negligent infliction of emotional distress.

Defendant New York Life seeks summary judgment in its favor on statute of limitations grounds, and asserts other substantive defenses to plaintiffs' claims as well. The Court has carefully considered the briefs and supporting materials submitted by the parties, as well as the oral arguments of counsel. For the reasons stated below, defendant's motion is granted in part and denied in part.²

DISCUSSION

Federal jurisdiction in this case is based upon diversity of citizenship under 28 U.S.C. § 1332. The substantive rights and obligations of the parties are therefore determined with reference to Montana law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Caesar Electronics, Inc. v. Andrews, 905 F.2d 287, 289 n. 3 (9th Cir.1990).

Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The moving party must initially identify those portions of the record before the Court which it believes establish an absence of material fact. T.W. Electrical Service, Inc. v. Pacific Electrical Contractors Ass'n., 809 F.2d 626, 630 (9th Cir.1987). If the moving party adequately carries its burden, then the party opposing summary judgment must then "set forth specific, facts showing that there is a genuine issue for trial." Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100, 1103-04 (9th Cir.), cert. denied, 479 U.S. 949, 107 S.Ct. 435, 93 L.Ed.2d 384 (1986).

All reasonable doubt as to the existence of genuine issues of material fact must be resolved against the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Nevertheless, "disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Electrical Service, 809 F.2d at 630 (citing Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510). "A `material' fact is one that is relevant to an element of a claim or defense and whose existence might affect the outcome of the suit. The materiality of a fact is thus determined by the substantive law governing the claim or defense." Id.

If a rational trier of fact might resolve disputes raised during summary judgment proceedings in favor of the nonmoving party, summary judgment must be denied. Matsushita Electrical Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). Thus, the Court's ultimate inquiry is to determine whether the "specific facts" set forth by the nonmoving party, viewed along with the undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence. Id. at 631. If so, summary judgment must be denied. Having so stated, the Court now turns to the merits of the pending motion.

A. Count I: Negligent Misrepresentation

In Count I of their Amended Complaint and Demand for Jury Trial ("Amended Complaint"), plaintiffs allege that agent Schwan "negligently misrepresented all insurance products sold to Shupaks, by guaranteeing interest rate return (sic) of 11% or higher, stating that insurance policies and annuities are a better savings vehicle than a savings account, and misinforming Shupaks as to the amount of money necessary to prepay a life policy", knowing the representations were false. (Amended Complaint, Count I, para. 27.) Defendant seeks summary judgment in its favor on this claim, arguing that the claim is barred by the applicable statute of limitations.

A claim for negligent misrepresentation is governed by the two year statute of limitation found at Montana Code Annotated ("M.C.A.") § 27-2-203. See R.H. Grover, Inc. v. Flynn Ins. Co., 238 Mont. 278, 286, 777 P.2d 338, 343 (1989) (citing White v. Lobdell, 208 Mont. 295, 306, 678 P.2d 637, 642 (1984)); Falls Sand and Gravel Co. v. Western Concrete, Inc., 270 F.Supp. 495 (D.Mont.1967).

"This limitation period begins to run when the plaintiff `discovers' the misrepresentation. Section 27-2-203, MCA. Under Mobley v. Hall, (1983), 202 Mont. 227, 657 P.2d 604, `discovery' occurs when the plaintiff acquires such facts as would reasonably prompt inquiry or action."

Grover, 777 P.2d at 343. Thus, if a party asserting negligent misrepresentation "has `notice or information of circumstances which would put him on inquiry which if followed would lead to knowledge, or that the facts were presumptively within his knowledge, he will be deemed to have actual knowledge of the facts.'" Holman v. Hansen, 237 Mont. 198, 202, 773 P.2d 1200, 1203 (1989) (citing Mobley v. Hall, 202 Mont. 227, 657 P.2d 604 (1983)). "The question of whether there has been a `discovery' of facts sufficient to start the running of the statute of limitations is a question of law." Id. (citing Mobley, 657 P.2d at 607).

The original Complaint in this action was filed on May 16, 1989. Thus, applying a two-year limitation period, plaintiffs' claims are time-barred if plaintiffs had actual or inquiry notice of Schwan's negligent misrepresentations prior to May 16, 1987. The Court has carefully reviewed the Amended Complaint and the other materials before it, including the depositions of both Wilma and Thomas Shupak, in an attempt to determine the state of their knowledge during the relevant time frame. Having so done, the Court concludes that Count I of the Amended Complaint is time-barred.

Schwan's negligent misrepresentations are alleged by plaintiffs to have occurred in 1983. (Amended Complaint, paras. 5-9). This is when plaintiffs met Schwan, and when he sold them the policies in question. The record shows that plaintiffs were told by another New York Life agent in the fall of 1983 that Schwan had inaccurately represented the provisions of one of the policies sold to them. See Deposition of Jane May, pgs. 19-20. The record also reveals that as early as 1985, both Thomas and Wilma Shupak had doubts about the status of their insurance policies and the truth of the information which had been presented to them by Schwan. Deposition of Wilma Shupak ("W. Shupak depo."), pg. 79. In 1985, Thomas Shupak grew increasingly distrustful of Schwan, and was uncomfortable with Schwan's blithe reassurances given in response to his questions about their policies. Deposition of Thomas Shupak ("T. Shupak Depo."), pgs. 13-14.

By mid-1985, after Wilma Shupak had given $20,000.00 to Schwan to pay up two of their life insurance policies, Thomas Shupak's distrust for Schwan was such that he became angry at his wife for paying over the money to Schwan, and told her that Schwan "went south" with her money. W. Shupak depo., pg. 86.

To verify the benefits and cash value of the policies as represented by Schwan, Thomas Shupak asked his banker to assess the value of the policies for loan purposes in 1985. T. Shupak depo., pg. 14. In response to that inquiry, Thomas Shupak's banker told him that "there is no way you are going to get any $20,000.00 in seven years", as Schwan had represented to them. W. Shupak depo., pg. 77. The banker's remarks served to increase plaintiff Thomas Shupak's concern about the policies, and he began "hounding" New York Life for answers. W. Shupak depo., pg. 77; T. Shupak depo., pg. 12.

Plaintiffs did not receive satisfactory responses to...