White v. Consolidated Planning, Inc.

• Decision Date: 05 October 2004
• Docket Number: No. COA03-483.,COA03-483.
• Citation: White v. Consolidated Planning, Inc., 166 N.C. App. 283, 603 S.E.2d 147 (N.C. App. 2004)
• Parties: John W. WHITE and his wife, Katherine A. White, Plaintiffs, v. CONSOLIDATED PLANNING, INC.; Park Avenue Securities, LLC; Guardian Investor Services Corporation; The Guardian Life Insurance Company of America; Keyport Life Insurance Company; Provident Life and Accident Insurance Company; and Robert W. White, Defendants.
• Court: North Carolina Court of Appeals

603 S.E.2d 147

166 NC App. 283

John W. WHITE and his wife, Katherine A. White, Plaintiffs, v.CONSOLIDATED PLANNING, INC.; Park Avenue Securities, LLC; GuardianInvestor Services Corporation; The Guardian Life Insurance Company of America; Keyport Life Insurance Company; Provident Life and Accident Insurance Company; and Robert W. White, Defendants.

No. COA03-483.

Court of Appeals of North Carolina.

October 5, 2004.

Kilpatrick Stockton, L.L.P., by David C. Smith and Tonya R. Deem, Winston-Salem, for plaintiffs-appellants.

Sharpless & Stavola, P.A., by Lynn E. Coleman, Greensboro, for defendant-appelleeConsolidated Planning, Inc.

GEER, Judge.

This appeal presents the question whether the sins of the son should be visited upon the father.Plaintiff-appellantJohn W. White("plaintiff") lost more than $300,000.00 when his son Robert W. White("Robert White"), an account executive and Senior Vice President for defendantConsolidated Planning, Inc.("Consolidated"), misappropriated the funds.Plaintiff has appealed from the trial court's orders granting Consolidated's motion to dismiss plaintiff's claims for negligent hiring, breach of fiduciary duty, constructive fraud, and one instance of conversion and granting summary judgment to Consolidated on plaintiff's remaining claims for negligence, conversion, fraud, and unfair and deceptive trade practices.

For reasons discussed below, we reverse the trial court's dismissal of the negligent hiring, breach of fiduciary duty, and conversion claims, but affirm as to the constructive fraud claim.We reverse the trial court's entry of summary judgment on the claims of fraud, conversion, and unfair and deceptive trade practices to the extent that the judgment was based on Consolidated's lack of vicarious liability because plaintiff has presented sufficient evidence to permit a jury to find that Robert White was acting "within the scope of his employment" as our courts have defined that phrase.We agree with the trial court that plaintiff's claims for conversion and negligence are barred by the statute of limitations, but hold that there are genuine issues of material fact as to the timeliness of plaintiff's fraud claim and as to whether Consolidated is equitably estopped from pleading the statute of limitations with respect to each of plaintiff's claims.Finally, we hold that plaintiff has forecast sufficient evidence that he will be able to present a prima facie case of negligence and unfair and deceptive trade practices.We, therefore, affirm in part and reverse in part.

Facts

The evidence presented on defendant's motion for summary judgment, when viewed in the light most favorable to the plaintiff, tends to show the following.Defendant Consolidated provides financial planning services to both individuals and businesses, specifically including retirement planning analyses.It is a general agent for defendant Guardian Life Insurance Company("Guardian") and has agency agreements to sell insurance products for companies such as defendantKeyport Life Insurance Company("Keyport") and defendantProvident Life and Accident Insurance Company("Provident").Consolidated employed John and Katherine White's son, Robert White, a licensed insurance agent, as an account executive in its Winston-Salem office between March 1992 and May 1999.As part of Consolidated's marketing plan, the company gave Robert White the title of Vice President and, later, Senior Vice President even though he was not an officer of the company.Robert White sold annuity products and life insurance policies for several companies, earning commissions for himself and Consolidated.He was authorized to handle client funds and service client accounts.

Both Mr. and Mrs. White, who are retirees, purchased various insurance and annuity products through their son using money that they had saved through employer-sponsored retirement plans.Consolidated founder and president Charles R. Dobson, Sr. testified that Consolidated considered the Whites to be customers of Consolidated when purchasing these products.The Whites had no prior investment experience and had never before worked with a financial advisor.

Robert White recommended that his father invest his retirement funds in Keyport annuities.On or about 19 December 1993, plaintiff, through his son, rolled over funds from his retirement into a Keyport annuity in the amount of $177,508.21 ("first Keyport annuity").On or about 18 April 1994, plaintiff purchased, again through his son, a second annuity issued by Keyport in the amount of $267,926.75 ("second Keyport annuity").Consolidated and Robert White both received commissions for these transactions.

Beginning in 1995, Robert White, because of a gambling addiction, began systematically siphoning funds from plaintiff's annuities without plaintiff's knowledge.To obtain the money, Robert White notified Keyport that plaintiff's address was that of his own office at Consolidated.Robert White then forged plaintiff's signature on requests to withdraw funds from the annuities.Keyport disbursed the funds either by checks delivered to Robert White at Consolidated's address or by wire transfer into an account that he specifically created for the funds.In nine transactions, Robert White withdrew a total of $127,820.91 from the Keyport accounts.

To hide the thefts, Robert White provided fictitious Keyport account statements to plaintiff, which the Whites testified led them to believe plaintiff's funds were intact.Plaintiff did not receive account statements or other correspondence directly from Keyport because Robert White had listed Consolidated's address as the record address for the annuities.Fearing, however, that his parents would learn of the thefts through tax documents, Robert White convinced the Whites to leave their tax preparer, told them he would handle their taxes, and then failed to file their tax returns for 1996 through 1999.

In March 1997, Robert White induced his father to transfer funds from the second Keyport annuity to an annuity issued by Provident by falsely promising him that the Provident policy would generate a particular rate of return.In fact, the Provident annuity had a lower rate of return.In addition, Robert White did not tell his father that the transfer would incur a surrender charge of $12,350.44 to Keyport and commissions to Robert White and Consolidated.

As he had with the Keyport annuities, Robert White notified Provident that plaintiff's address was that of Consolidated's office with the result that plaintiff did not receive any account statements or correspondence directly from Provident.Robert White forged plaintiff's signature on four separate requests to withdraw funds from the Provident annuity, withdrawing a total of $175,402.33.Robert White hid these transactions by providing his father with false account statements on Consolidated letterhead.By 8 January 1998, the Provident annuity had been fully surrendered.

On 28 June 1996, Robert White purchased a $200,000.00 life insurance policy from Guardian for his father.As he had with the Keyport and Provident annuities, Robert White changed the record address for the policy although on this occasion, he used his own home address so that all documentation regarding the Guardian policy was sent to Robert White's home.Significantly, Guardian had a policy of not forwarding disbursements on its policies to an agency address; it required that all checks be sent to the policy owner's address of record.Between July 1998 and February 1999, Robert White requested four loans on the policy (totaling approximately $10,000.00) for his own use and without his father's knowledge.

With respect to the 15 December 1998 and 22 February 1999 loan requests, Robert White submitted them for processing to Consolidated, as general agent for Guardian, rather than to Guardian.Robert White faxed a memo to Consolidated's office in Charlotte requesting that the loan proceeds on plaintiff's policy be sent to Robert White's home address "ASAP, please."When Robert White failed to repay the loans, the policy was canceled and the obligations were repaid from the policy principal.Plaintiff was unaware that his policy had been canceled because correspondence regarding the policy was sent to Robert White's home.

In April 1999, Pamela Westbrook, another client of Consolidated and Robert White, filed a complaint with the National Association of Securities Dealers reporting that Robert White had misappropriated money from her account by liquidating one of her investments and placing her funds in his personal bank account, by providing her with fraudulent account statements, and by requesting that she sign blank customer service forms.After an investigation of this complaint, Consolidated terminated Robert White on 28 May 1999.

Consolidated contacted certain other clients whose accounts Robert White had handled to determine if he had mishandled their funds.In August 1999, Consolidated clients Hilary and Robin McKeown complained that Robert White had mishandled their funds by placing them in an account they did not request.Consolidated reassigned Robert White's accounts to other representatives.

With respect to the Whites, however, Consolidated did not inform the Whites that their son had been terminated or disclose that he had mishandled funds in client accounts.Consolidated allowed Robert White to take plaintiff's Provident and Keyport account files with him, but kept the Guardian file.The company did not reassign the Whites to another account representative or investigate the status of their accounts to determine whether Robert White had mishandled their funds.Consolidated also did not forward to the Whites the account statements and other correspondence that Robert White had fraudulently arranged to have sent to the Consolidated office.Plaintiff offered evidence that Consolidated's standard practice was to allow mail...