Tilley v. Franklin Life Ins. Co.

• Decision Date: 30 September 1997
• Docket Number: No. 71615,71615
• Citation: 957 S.W.2d 349
• Parties: Everett A. TILLEY and Bonita J. Tilley, Appellants, v. The FRANKLIN LIFE INSURANCE COMPANY and John Brooks, Respondents.
• Court: Missouri Court of Appeals

Page 349

957 S.W.2d 349

Everett A. TILLEY and Bonita J. Tilley, Appellants, v. The FRANKLIN LIFE INSURANCE COMPANY and John Brooks, Respondents.

No. 71615.

Missouri Court of Appeals,

Eastern District,

Division Three.

Sept. 30, 1997.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Nov. 24, 1997.

Application for Transfer Denied

Jan. 27, 1998.

Mark Belz, St. Louis, for appellants.

Steven Koslovsky, Clayton, for respondents.

CRANDALL, Judge.

Plaintiffs, Everett A. Tilley and Bonita J. Tilley, appeal from the trial court's grant of summary judgment in favor of defendants, The Franklin Life Insurance Company and John Brooks, in their action for fraud, fraudulent concealment, conversion, and negligence. We reverse and remand.

Our standard of review is set forth in the oft-cited ITT Commercial Finance Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). The record before the trial court consisted of insurance policies, depositions, exhibits, and affidavits. The record established that in September 1987, Everett Tilley (Tilley) and his accountant met with Gregory Ervasti, an independent insurance agent of defendant, The Franklin Life Insurance Company (Franklin), for the purpose of setting up a retirement plan for Tilley and his wife, Bonita Tilley (wife). Tilley informed Ervasti that he did not want insurance. Ervasti told Tilley that insurance was a necessary component of the retirement plan and proposed that an annual payment of $30,000.00 be applied as follows: $15,000.00 to the cost of life insurance on Tilley; $10,000.00 to be placed into a side investment account (side fund) for Tilley, with a 13 percent annual return; $3,000.00 to the cost of life insurance for his wife; and $2,000.00 into her side fund. Tilley accepted the proposal and he and his wife each filled out applications to Franklin for insurance.

In September 1987, Ervasti delivered the policies to Tilley. Tilley's policy indicated that it had a "face amount" of $1,368,767.00 and an "annual premium" of $25,000.00; his wife's policy indicated a "face amount" of $362,182.00 and an "annual premium" of $5,000.00. Each policy described itself on the front page as a "whole life" policy. When Tilley received the policies, he questioned Ervasti about the failure to mention the side funds in the policies. Ervasti assured him side funds were included.

After September 1987, Tilley received premium notices from Franklin which indicated that the premiums were being applied to pay for the insurance policies. Tilley became "uncomfortable" when none of the premium notices showed funds going into a side fund. Repeatedly during 1987 and 1988, Tilley expressed his concerns to Ervasti as well as to his accountant. Each time Ervasti assured him that he was getting the plan as proposed.

In November 1988, Tilley requested documentation from Ervasti regarding the side funds. Ervasti provided a computer printout showing that part of the premiums had been placed into side funds and how much was in the accounts. Throughout 1988 and part of 1989, Tilley continued to receive premium notices from Franklin which did not refer to any side funds. He continued to "feel uncomfortable" and spoke with Ervasti regarding his uncertainty about the side funds on numerous occasions.

In November 1989, Tilley again requested a printout of the side fund accounts from Ervasti and Ervasti agreed to send it. When Tilley did not receive it, he contacted Franklin directly and was advised that his premium payments had been applied only to the purchase of life insurance policies and that no money had been deposited into side funds. Upon learning this, he stopped making further payments to Franklin. Franklin refused to return the premiums Tilley paid.

In June 1990, Tilley and his wife filed an action against Ervasti for fraud, which was settled in 1992. In October 1994, they brought the present action against defendants, Franklin and John Brooks, manager of Franklin's St. Louis regional office (hereinafter referred to collectively as "Franklin"). Franklin moved for summary judgment on the ground, inter alia, that the statute of limitations barred the Tilleys' action. The trial court granted summary judgment in favor of Franklin on all counts. ¹

In his first and second points on appeal, Tilley ² contends the trial court erred in granting summary judgment in favor of Franklin on the basis that his action for fraud was barred by the applicable statute of limitations. ³

Where the issue of the statute of limitations involves determination of when a claim accrues, summary judgment cannot be granted unless the evidence is so clear that there is no genuine factual issue and the determination can be made as a matter of law. Rogers v. Illinois Cent. R. Co., 833 S.W.2d 426, 427 (Mo.App. E.D.1992). Tilley asserts that there was a genuine issue of material fact as to whether Franklin, through its agent Ervasti, actively concealed the fraud such that the statute did not begin to run until Tilley had actual notice of the fraud.

The statute of limitations for a cause of action for fraud is five years and the cause of action is "deemed not to have accrued until the discovery by the aggrieved party, at any time within ten years, of the facts constituting fraud." Section 516.120(5), RSMo (1994). This rule is interpreted to mean that when facts constituting fraud are not discovered within the prescribed ten years, the cause of action is deemed to accrue at the termination of this ten-year period and a plaintiff has an additional five years from the end of the ten year period to bring his action; or, in any event, a plaintiff must bring the action within fifteen years of the commission of the fraud. Kansas City v. W.R. Grace & Co., 778 S.W.2d 264, 273 (Mo.App.1989). If a party takes affirmative action to conceal the fraud, the statute is tolled until the fraud is discovered. Id.

Here, the record reveals that Ervasti, as Franklin's agent, misrepresented the nature of the insurance policies to Tilley beginning in 1987 when he delivered them and continued to misrepresent the policies through 1989 by repeatedly attesting to the fact that side funds were included in the policies. In 1988, Ervasti, as Franklin's agent, furnished Tilley with a statement purporting to show the balance in the side funds. It was only when Ervasti failed to comply with Tilley's request for another statement in 1989 that Tilley checked with Franklin and discovered that the side fund did not exist.

Thus, there was not only the alleged original fraud upon Tilley by Ervasti, as Franklin's agent, in representing that there were side funds incorporated into the insurance policies at the time of the purchase and delivery of the policies; but also the alleged continued fraud by Ervasti after Tilley purchased the policies when Ervasti repeatedly assured Tilley that the side funds existed and furnished a bogus accounting of the side funds in 1988. In light of these assurances, Tilley did not investigate further until 1989, when he discovered that he had purchased purely insurance policies. Ervasti's conduct constituted "a studied effort ever afterwards to disarm the plaintiff of suspicion, and thus preclude an investigation." See Selle v. Wrigley, 233 Mo.App. 43, 116 S.W.2d 217 223 (1938). As the court stated in Selle, "One cannot perpetrate a fraud and then for years thereafter use fraudulent means and methods to allay suspicion, and then be in the attitude of claiming that the statute of limitations has run. To so hold would be to give such a party the advantage of his own wrong." Id.

There remained genuine issues of material fact as to whether Tilley had failed to discover the alleged fraud sooner than five years before he filed the present action and as to whether the active concealment of the alleged fraud excused him from doing so until he had actual notice of the fraud. The trial court erred in entering summary judgment in favor...