*1 192, Co., Pickle 270 Wis. Weeks Moreover, 584. N.W.2d payment infer contractual intent amount after the of loss due becomes actually agreed upon or has been either 822; F.Supp. See also F.R. binding on the
determined in a manner D. 97. keeping parties. policies, in Each policy provisions of with the standard fire Wisconsin, 203.01, pro- statute, Sec. payable
vided that the of loss is amount sixty days received proof after loss the defendant “ascertainment cmd agreement be- loss is made either Company ex- tween the and this insured writing”
pressed or such loss is ascer- appraisers selected tained award of policy. On the accordance with the circumstances disclosed
facts we are of that the Dis- record denying pre-
trict did Court not err
judgment interest. judgment District order of the
Court is affirmed.
Affirmed. Appellant, ANDERSON,
J. Leland
v.
Roger KNOX,Appellee. I.
No. Appeals
United States Court Circuit. Ninth
Dec.
703 Cal., Lawrence, Reseda, Ivan E. fo¿ Hills, Cal., Beverly Ezer, Mitchel J. appellant. B. Borth- and William J. Cades Russell Hawaii, appellee.
wick, Honolulu, Honolulu, Cades, Wild, Smith, Beebe & Hawaii, counsel. CHAMBERS, POPE Before Judges.
HAMLIN, Circuit Judge. POPE, Circuit plaintiff Knox, appellee The who brought below, recover this action damages alleged incurred alleged consequence fraud him in part misrepresentation inducing .appellant, Anderson, purchase insurance life certain Insurance contract New York Life agent. company’s Co. Anderson judgment below court had appeal is taken. which this judge’s opinion case, which trial in the reported jury, was tried without Anderson, D.C., 159 the title v. of Knox Judge’s F.Supp. formal find- 795. The ings F.Supp. reported also at length keeping purpose For the present opinion acceptable within limits shall not undertake we to set here length findings forth those but will as- sume that the readers of .this acquainted themselves with the trial findings. judge’s opinion and negotiations pur- which led to the began August, insurance chase Knox, years age, then lived his wife three children on employed where of Maui he was Island superintendent sugar a field Anderson, plantation. a resident of Los Angeles, many had been for an representative salesman, he established office in association Honolulu in with one Kreid- saving through deduc- agent, a view calculated. ler, an insurance also paid to be deemed Hawaiian tion interest selling main feature of the specialized attractive Islands. Anderson *3 insurance.) throughout plan paying life financed referred to of what sale insurance as bank financed advantages the record purported 4. The of ob- plan. The loan under the bank taining $100,000 insur- this extra of life type as of insurance features of provide was that it at once ance would by illustrated Knox be large coverage early was sold for Knox a at an financing describing the the method of age premiums when the lowbe covering purchased his policy which he outlay outlay, for and being a minimal pay- $100,000 ten This was a own life. merely as above the indicated in- pre- policy. the annual As ment life pre- terest on bank loans for successive $7,265 miums on savings. by (As miums reduced his tax only annual cash income Knox’s total against this, as we shall later have occa- neighborhood $10,000, in- the the note, year’s premium sion as each under this offered him surance was due, came the insured must increase his among plan financed which involved bank loan at bank the amount of the things these features: other premium annual and in ten he finds very himself with a Knox turned Anderson his substantial amount 1. over to owing existing bank, year life life with various each his payments companies. accordingly.) interest had been increase These aggregat- sundry issued face amounts aspect plan primarily An of this something $35,000. excess selling agent attractive to the was the doing so he authorized to con- agent’s commission, computed size of the vert them manner will here- which premium on the basis of an annual far in described, after be and to borrow thereon ordinarily excess of what would be pay premium sufficient cash to the first through selling procurable person in $7,265, pledge remaining and to type Knox’s financial situation the cash values of those as collateral policy agent might which an insurance for bank loans hereafter mentioned. likely be to be able to sell. plan subsequent pre- 2. The was that a man whose income and financial For borrowing provided by be miums would is such that income tax condition thereof bank and from a amounts high puts him in brackets and who has assignment securing bank policies. liquidate steadily the means n oldand new calculated It was creasing sources, out of other debt the time the first such plan finance well can be useful. bank assignable procured cash value for use has been Much made un- security purposes would be such that the paying Thus X conditions. der necessary per loan would not exceed high bracket, in a income taxes with re- assigned cent of the values. currently which wishes to sources use purposes, Knox, insured, pay for other instance in each market, may find stock only loans, bank .year interest plan of insurance an finance payments attractive his interest would be but since gets arrangement. man Such a an im- the annual net out-of- tax deductible large coverage of by mediate required insurance with pocket payment to be early age premiums based on his carry at a Knox in order to when he is sure of his own time insur- interest on the loan less the ability. of taxes he would amount able save deducting from the record that this interest in his income is clear what (Obviously wholly brought controversy, about this tax return. the net cost to merits, apart from its was that Knox calculated this manner would n depend degree kind man. Knox had in a substantial an an- not that year; salary per tax bracket which his tax was had $8100 income nual purchased, namely, repre- in ex- that Anderson income investment Knox, per year.1 came sented to under circumstances cess of $1600 permitting rely thereon, him testified that the which he from securities addition, proposed plan $12,000. In for bank financed of about insur- value agreed purchase superintendent ance which position “was sugar plaintiff use plantation, free suitable Knox had the family dwelling free ample and the and fitted house their needs.” of an company court automobile. use of proceed We shall note as we that the was such that Knox’s income found trial representation court treated this per placed tax he was cent expression one fact and as a mere *4 Knox bracket.2 It also found that opinion. of Our ques- discussion of that being expectations time at some of raised primary tion will inquiry: await our did manager of in the future to assistant judge evidence here warrant sugar salary plantation $12,- of at a finding representa- there was such a year. per representation tion and that the as made was false. court in- The found that Knox was ' buy duced the life insurance It is our that the evidence representa- above mentioned certain before the trial court warranted its find tions made to him ings Anderson which representation that there such was a repre- were false and fraudulent. These suitability representa of and upon plaintiff sentations which relied tion was true that the insurance length listed at and in detail under some program sold Knox was in fact anot findings paragraph beginning 8 of the suitable one existing view of all the facts then page F.Supp. 340 of 162 respect income, with to him—his condition, prospects, his financial paragraph subsequent court In a family, prospective their and needs. failed to disclose that Anderson found information plaintiff certain material question The repre whether the respect which knew and facts sentations made Anderson to Knox proposed plan; to the actually false made with such duty dis- was under a to make Anderson recklessness as to make them substantial relationship of trust because a closure ly fraudulent, one; more is a difficult confidence, and Ander- because of and part upon turns a decision as to wheth knowledge; superior and court son’s representation suitability er liability part concluded representation a truth of fact accrued not from al- Anderson expression ap opinion. mere a representa- leged false and fraudulent proaching these matters it is not the func tions, but also these failures to dis- initially of this find tion court to the facts close. merely to ascertain whether were, by the as found trial court facts purpose dis- think We record, clearly view the erroneous. go appeal posing need of this fur- we no relating inquiry to consider the facts directed than Our is to the deter- ther found a court to be the as to whether case was made to what the central mination representation upon primary a claim of false and fraudulent here respect upon policies misrepresentation which of facts top per year; $1500 court found would come off his 1. his deductions $1600.” “$1500 or said bracket. stipulated method re- that his tax an abbreviated actual 3. is It alleged representation purpose calculating ferring for the de- bracket suitability. representation in- of interest the bank ductions pre- as to the reasons would be Of a statements course cluded 24.6%. fully developed suitability, more could not be found. its cise bracket 24.6% paragraph stipulation (a) 8 of the assumed is subdivision upon findings above to. that not all of referred calculation based 70 language in the There ant.” Similar used detriment. relied to his sug- law findings language first of court’s conclusions of which some pro- “relationship trust gests refers where it trial court that the theory and confidence existed between there ceeded Defendant”, be- fiduciary relationship kind Plaintiff some Thus Knox.
tween Anderson However, unnecessary in- we find 341), finding (162 F.Supp. court’s relationship quire fiduciary ¿id Knox, dis- defendant’s failure to refers to the exist between Anderson and facts information close material not, plain We assume that it did for it is duty to “which was under agent Defendant that Anderson was the because of the reía- agent to Plaintiff company disclose surance and as such tionship and confidence which of trust to Knox who endeavored make a sale dealing Plaintiff Defendant must understood that he existed between agent knowledge party.4 superior of another of Defend- with and the Underwriters, supporting judgment Appellees tional Association Life *5 emphasis upon placed members of which subscribed a code considerable to preamble which a re- of ethics contained Barron Estate Edward Com- the case of pany citing: position Co., 561, under- 126 “The the life Cal. Woodruff v. unique L.R.A.,N.S., 351, that he is liaison 357, That writer in the P. case, company. opinion, a his client and his As in between to later referred high life insurance adviser he owes a was in which the defendant architect one duty professional sought towards his client liable conse- was to made occupies posi- quence representation same he also a a at the time build- of his loyalty company, plans ing trust and to his tion of the architect drew for which highest Only observing specifications the ethical could be constructed at any can avoid conflict between balance a not to exceed a certain amount. cost obligations. Therefore, question presented I be- two was my responsibility hold to be to a statement of lieve assertion was architect’s my high expression opinion. business esteem and strive to was fact or prestige.” guilty its Its two maintain precepts first the defendants had been held that duty to were stated to be as follows: in a failure make breach say- keep my facts, “Two. To the needs clients of certain the court disclosure respect “By always uppermost. agency Three. of this that: virtue To relationship my confidence and hold trust of trust and confidence client’s high duty personal to information.” The of defendants reference it became purchaser as all the knowl- insurance a client full disclosure of to make interesting. edge they possessed and which it which McConnell, important their In Steadman v. 149 Cal. was desirable principal App.2d For a P.2d court should have.” recent agent upheld which an insurance was the action of the Insurance Corn- case in liability give suspending charged failure of a for to missioner license property agent making to owner false and information life insurance representations selling as an bro- bank whom he ker, acted insurance fraudulent Brink, (D.C.Wash.), Hardt v. life insurance. court said: see financed experienced appellant F.Supp. was an ex “The field; port of those cases But in each where lia- insured mere bility projected upon layman led to was failure to who was believe that expressed give was the defendant clear- meet certain information plaintiff. Certainly ly agent objectives. relationship We do not Mrs., agency fiduciary any relationship in which assume such here. was a one Mr. and agent appellant’s not a believe was full time were entitled to Anderson Stokes Life. He had what he statements.” New York called material California, compa- “brokerage Hawaii, contract” with that In as life insur- a ny. required agents procure anee writing Knox, Anderson and sell such In used a solicit license Haw.1955, 181-365). (Rev.Laws of § in which his name letterhead was fol- suspended description re- license lowed “Insurance Such yoked Annuity has Above his if the licensee “with intent Counsellor". name misrepresented deceive, materially appeared the words “Life Member Mil- contract; Round Table or effect of lion Dollar N.A.L.U.” terms engaged engage about or is N.A.L.U. was abbreviation for Na- or has
7Q7 Representation Whether the embraces all four of these fundamental Was Made essentials.” testimony substance the wit- approached for At the Knox was time ness Kreidler as well as that Knox and his wife was to the effect that buy purpose inducing him many sim- under-
insurance which Anderson was taking ilar statements were made Anderson sell, using the Anderson was to Knox at the time that Anderson first agent men- Honolulu Kreidler above presented the insurance deal to him. ar- tioned. rangements had made advance Kreidler with Knox for testified he made no home, visit and Kreidler latter’s representation suitability as to the present efforts the sales at the time selling. Plainly being Kreidler Anderson. judge the trial did not him. In- believe expressed testified that Anderson then deed, hereafter, as we note Anderson tes- suitability his of his suitability question tified that the family. plan for He said: of the bank loan for Knox and his explained ad- “Mr. Anderson that it needs did concern him.6 vantageous Roger fam- and his That Anderson did fact inform Knox ily, times him at all it would benefit that the awas suitable one and long too, cheaper and that it urged strongly purchase him to of tax a credit it under he could afford meeting surance as needs con- deductibility, that he as well capabilities supported sistent need it and not it than to need by evidence the trial court had the *6 plan it, excellent that it was an have throughout right to believe. period of this the entire Right Rely To man’s life.” opinion We are also of the that opinion The of the district court sets under the circumstances of this case the length (159 F.Supp. p. 803), out at fully finding court was warranted in that letter written later Anderson to Knox right rely upon Knox had the “exemplifies it which found [Anderson’s] representations suitability. of The presentation.” Among method of other opinion findings court’s and its reflect the things effect, to the same letter the view that Anderson went to considerable you readily “I am sure stated: can see ground lay pains to work for a max advantages outstanding pro- this impact salesmanship imum upon his gram”, and “There are four fundamental Knox. good investment, namely, to a essentials 2nd, 1st, Security, Guarantied In- As there noted Knox [sic] first received a Value, 3rd, Quick Marketability, crease Bodge, letter president introduction from E. E. 4th, Flexibility of Contract. This Plan eorpora- of a Honolulu business any $50,000 policy fraudulent transaction” “if and of another license, appear conduct of his affairs under the life his wife. It would findings has the licensee shown himself to he trial court’s and injury public.” regarded writing and loss to source that of this let- 181-402). (§ part continuing plan, is conceivable that one ter of a de- sign Wigmore who is thus licensed is virtue or scheme. See on Evi- dence, ed., made assume toward act duties § 2d and McCormick on comparable fiduciary purchasers p. Evidence, 346. lawyers obligations physicians, and story substance his was the same as 6. concept and that this given by explana- that him in a letter quoted basis statement tion written to an officer of the New York California case cited. schedules, photostats “From Life: herewith, shall 5. We have occasion later to discuss of which are enclosed and the admissibility explanations given you Knox, relevance to Mr. can readily which was letter completed written after had Knox understand that he and his wife purchase $100,000 up their own minds.” my gave big describing an insur- work tion, Anderson a build- Anderson Mr. up annuity ability capability tem- as to his who ance and counsellor qualifications.”
porarily had the and who in the Islands financed information about a bank latest finding court trial first Bodge plan. that indicated pur F.Supp. (162 343), when that skeptical but about program financed of bank chased this inquiries and found the had made did that he knew insurance “defendant entirely legal; com- that some and did not not understand said panies about were not enthusiastic same and intend that he understand plan. they because not write this could independent did not Plaintiff make suggested care It was 'that completely thereon relied decision pres- give Mr. Anderson time some to be said Defendant” cannot plain infer- entation of this matter. clearly erroneous, merely because superior had ence was that Anderson gave Knox Kreidler the assurance which knowledge subject. Anderson man who was he was meet a about to suggested writing letter give especially qualified information sent. examined form it was before its field, one “the indeed gave job”,9 qualified Kreidler instructions to do this tremendous approach prospects keeping them circumstanc because there were but also meeting “anticipation me” and ex- infer from which court could es give plaining obliged “I them will able to Knox was to take the Kreid- respects information many important all the desire.” faith “I, naturally, part of ler as a testified: in the dark.10 act get agreement job financing was to Kreidler their and that tremendous of bank divulged “my operandi grape- modus will not he tried others it failed ** competitor other vine.” suggest you I would [sic] the least “they Anderson, testifying, conceded keep them can tell more *7 right have a that I had would to believe anticipation meeting them in me ex- selling experience in had considerable life plaining them will to to that I be able plan.” finance Mrs. insurance bank they give them all the information de- my husband said Knox testified: “Well cooperate if will sire but given had him our financial that he all requirements.” quoted above sen- statements, everything do our to grammatical complete- lacks some tence finances; taxes, our and our income meaning conveyed but the seems to ness therefore, said, well, everything, and he you be “The less them and the tell you I don’t understand this schedule but you keep anticipation more them in everything you and if in front meeting me the better be.” it will $100,000 you us to sched- advise take this represented 8. Kreidler testified that he you program why, and know can ule we very to Knox that Anderson was a suc- * * * it, well, afford take it. let’s man, authority cessful on just great had confidence in him even We financing plan the bank ramifica- its * * * I he came in the door. before ability savings to tions as tax and the years saying him it took remember carry to additional used insurance. He study figure bank to out this relating testimonial letters to Anderson very program, and the fact that he didn’t develop to this idea with His Knox. it other to show to salesman want procedure any prospective was to talk -to proved to me he considered them too purchaser about the merits of stupid up, and to follow it it would ability present plan financing to a life that, only us. From confuse he was an through bank, telling them, a expert far as as we were concerned.” including Knox, pre- that after certain Anderson, only by liminaries pert who was the ex- is evidence what An- work, present in this line of told Kreidler about his derson schedules prepared understand, infra, being a hard to as noted accurate schedule out- lining financing respects plan what the bank the numerous which accomplish for him. Knox He testified that various schedules furnished deficient, incomplete, Anderson himself had said that he was were Anderson qualified one that was this These basis “to do in error. schedules November, $50,000. When Anderson arrived the life of his wife Ellen for brought 1952, apparent It had he him a schedule become at that time enough Ex- there was in evidence as was which received value in old permit purported policy out the hibit which to set addition of such a proposed plan. details of financed the bank financed an At that time program. plain schedule, an in- other surance It is from received in evidence spection Roger 8, covering time that at the Exhibit that schedule both the presentation policies, was and Ellen used in the in form some Knox, when presented which time what was the similar to Exhibit was signed $100,000 policy, again up for the Knox. This in had the same impossible respect that schedule to tell from firmities as Exhibit 4 in of what happen happen old happened what was about to Knox’s had what policies.11 put it, policies. fact, As Kreidler it would Knox’s old In evidence possible prospective not have been for a is clear that all of Knox was told that purchaser relating tell what program this schedule to the facts the actual cost him furnished Anderson changes con- the terms of at a what later time. Kreidler stated that this program. preliminary incomplete summated old Kreidler of a use schedule why inquiry understanding said that pur he made as to with the by Anderson, prepared schedules chaser would obtain final schedule was part complicated. selling Exhibit Ander- were so of Anderson’s good replied “spent type son he had of insurance.12 many devising this schedule The evidence was that at the time Knox no Kreidler one could understand.” signed up for either of these two it.” said: “Even I couldn’t understand he could not have ascertained the facts May, 1953, values, approached premiums, Knox was to their their their again proposal dividends, value, with a their loan their interest purchase a further New York provisions, Life employed if even he had moneys sales. Their why deficiencies how these were used and hereafter treated where we discuss and was then told “You must have faith question confidence, sold must believe.” As fact suitable one. testified, Kreidler all that was there was to it! glance exhibit, appears 11. A at that page F.Supp. 799 of 159 makes this general, 12. Kreidler testified: “In when plain. buy a man was induced to *8 portion As indicated financing plan the insurance preliminary he had a program sold to Knox involved seemingly schedule which looked attrac- changing existing and alteration of his tive to him at time. When he had policies; signed insurance rowing upon this included the bor- the note for the amount of the pay- premium them of funds understanding with the that he premium of the first ment on the new schedule, obtain a final and when policy. change York New Life Another delayed final schedule was months cases, quite involved the alteration of the frequent so in some in premiums as to accelerate cases, year, any and in- changes 11 months to a rapidly. any cash crease the values more To or reflections on that final schedule Kreidler, put on effect this position direction of would have the insured in a procured Anderson, signa- from Knox nothing his anyhow, he could do he necessary applications already spent ture on the money, had he had companies, opportunity addressed and when no ney to consult with his attor- proceeds public loans were trans- or a certified accountant as to through payable Knox, actually mitted checks what he would have received un- financing Knox’s endorsement of plan, those checks was der the bank and there they procured; payable possibility getting were made no was out of the Anderson, Trustee”, program “J. Leland and An- without a substantial loss of proceeded proceeds money delay presentation derson collect due in and disburse them. Knox testified that the final schedule.” attempted had lie to learn from Anderson thought. .tionally famous, or less we more
certified accountant. The Living very had fortunate Angeles on Maui we felt then in Anderson Los had a man to our to have of his calibre come checks accounted for the * * * quoted him; used close islands. arid after the He been but endorsed to * * * many glowing adjectives interview, and when November, 1952, $100,- signed program a won- up he referred it was after Knox for the had program; this, he policy, derful Knox and he stressed told Anderson goodness.” they get be- informa- stressed its said that She wife all factual promised they they her hus- fore Anderson tion met she when received arrange trying had band it so final schedule.13 existing in- to lessen the of their costs We are of that there program: paying out surance “We were sufficient in evidence the record to war- much, felt, too we on the insurance. then judge believing rant the trial in find- And Mr. us that this Anderson showed ing Anderson, person either cheaper program, old our than through Kreidler, represented to Knox insurance, get and we would more much here Anderson found the man he which was most attractive.”15 only expert was not field who practically only illustrating man alive who Some of the circumstances plan fully understood the here and that how Knox on relied Anderson’s state- rely upon was a man whom could illuminating. instance, ments are For buy- for information as to what appeared during sales ing. found, short, Anderson, the court talk, alluding schedule, Exhibit my word substance said: You can take that the called attention fact telling you; I for what I am now stating later bracket, schedule showed a 40% give you just showing will a schedule he, Knox, that bracket. bought you what it works.14 how explained if that “even bracket, in the it would still be rely It is clear fact Knox did 30% favorable.” Anderson’s statements and we think argue that would idle here that Again, pro- as the sales conversation Knox should have found out for himself ceeded, inquired the Knoxes about reduc- principle emp- because of some of caveat dropping they after tor that the what not at all it, they started case found it burden- n represented it was to be. Knox testified: they some. Anderson assured them could my “I had in him faith because he was neglected do. so. What he them tell by leading recommended man business very was that could do so Territory. figured I he knew what (Finding 8(b) (3).) substantial loss. talking he was about. He had all the plain helped But it is that this assurance my figured giving facts case. I he was .they to lessen concern other- something designed me that was for me.” entering wise have about ex- undertaking. Again just Mrs. Knox testified: “We tensive Kreidler tes- thought, well, Knox, noting he will more than know tified that Exhibit said most insurance men because is so na- amounts in that the the last 15 *9 forthcoming September, 13. Kreidler “To testified: the best of until my knowledge accompanied leaving by as we Mr. were was letter addressed to they September 14, (Exhibit Anderson told the Knoxes that when Knox dated 1953 10B). saw the final schedule with all of fac- shall We have occasion to dis- therein, tual information contained that these documents cuss later. they pleased to know that their knew, so, Kreidler for Knox told him family protected very— this attempting that Knox was to reduce his pleased would be well with the n annual outlays existing insurance his protection that was afforded under program. insurance is plan.” chargeable knowledge. course promised a matter of fact the 14. As sched- ule introduced as Exhibit 10A not wrongful by was cur- not than defend he his were more actions call the schedule ing rently premiums; gullibility.’ Ander- paying attention to his victim’s schedule; “Disregard early leading Togni An v. Tam then said: case son enelli, Kreid- Cal.App. 7, 14, less.” cost Pac. 899 it will nevertheless terminology (1909), continued, Cooper, “He used reasoned ler P. J. pro- right ‘No more one have in law has either outlay of family complain less for morals to another tection for because placed great has too dollars.” reliance truth of what he himself has stated.’ related, cred thus here The facts (Cases cited)” sufficiently court, estab ited the trial law, right, matter of as a lish Program Suitable, TheWas rely representations suita as to on these Represented? As repre bility, if, found, the as the court brings inquiry' us to next false, and were sentations were support which is: does the record ar Appellant with intent to deceive.15a finding program court’s that the sold to' Kerr, gues, quoting & Mis Fraud from inwas not fact suitable? in take, from- abstains 254: “A man who again say Here must we ought quiry inquiry where finding point court’s on this not say and to so made cannot be heard clearly * * *(cid:127) erroneous. There was consider- ignorance. rely on his support able evidence it. Some ought inquiry inquiry absence of where qualified experts came from in the insur- made, is bound to have been the Court ance field who undertook to demonstrate in person from whom assume that through analysis pro- of the Anderson quiry should have been made posals charts, aid of dia- with the duty Such done what it is to do.” grams and mathematical calculations apposite situation a rule not to the fact sold to Anderson was not present noted Prosser has here. As (Ex- a suitable one. While schedules Torts, 552): (Law p. “The 2nd Ed. 4, 10A) hibits 8 and Ander- furnished half-century marked has seen a last self-explanatory, son were not re- change to of the courts in the attitude quired calcula- extensive mathematical reliance,” question justifiable ward just tions to disclose what the quotes Fuller, v. Chamberlin yet contemplated, calculatiqns once those 256, 832, 836, now 59 Vt. A. made, were for difficult rogue “no should classic statement court to draw factual inference of its illgotten simple enjoy plunder for unsuitability figures. from these reason that his victim chance Harper James, expert witnesses, fool.” And The Law of & both those Torts, puts plaintiff defendant, 7.12 the rule thus: “It does for the § were agreement lie to ar in the mouth of defendant in substantial as to what although gue that intended to cheat would constitute a suitable insurance him, plaintiff, lying family the latter and his and as to ought not to recover he should because what factors would-have to considered him,” adding not have trusted a footnote suitability. in order to determine such appellee correctly as follows: “Jenness v. De Moses Sake We think that has sum- Co., velopment 39 Wash.2d 234 marized the views they agreed these witnesses ‘Unquestionably appellants saying P.2d 865: “it was neces- credulous, particularly sary (i) naive and to know details exist- light experience program; of their (ii) the tavern its values *10 business, benefits, (iii) continuing but the rule is well settled and the cost of jurisdiction wrong-doer program, (iv) that a can- old the the additional cash repre- hereafter, false, 15a. As we shall note it be true or is one made any sentation made without to belief as with to intent deceive. disregard truth, or its with reckless (v) getting; outlay think it loss he was that fact program, for the new already destroyed protections any, old benefits, he under the some and if values had; program program, (vi) values the not worth additional that was and the program.” money cost; the it that Knox new would and the benefits of it; couId not afford he did not that thoroughly qualified ex- Cleve, a Van understand it. years field, with pert in the great striking thing pat A with about the experience, rather demonstrated specific program clarity degree to tern new was that under of the and reference why sharply protection it details, the the reasons Knox, during for for the decreased first ten program suitable was paid figures premiums amounts so that to be use of With program to failed of that re the end time the amounts that demonstrated protection Knox led to in the event were provide ceivable of death hard- cross-examination, know, albeit You would would "Q. want to 16. Anderson evasiveness, you not, degree ad- what the cost was the exist a certain ing Yes, program? would have to A. schedules factors our mitted that these require He testified: that. taken into consideration. be agree you Anderson, question do answer “Q. “Q. Mr. Just we suitability determining pro- get get of a to will on better. We will in gram such as one schedules afterwards. Third or^ fourth of insurance you presenting you Mr. Knox be to to —whatever it would also were want is— plan, first benefits finance know the that were contained financed you existing right? existing program, know the isn’t that would have that, provided, program, Yes, what it A. our schedule calls for what program, you to continue the will cost Then would want “Q. know existing pro- outlay the benefits of the also gram? what cash there additional would you agree A. Do that? program the new have to be you get are factors. But all of I am sure those additional benefits what right points program, right? don’t mention these new isn’t that out individual make his choice. Yes, A. the schedules get that, that. That I will back to “Q. that and show call for necessary certainly element is you Then want “Q. would next suitability, not. it consideration of the variables and the know what risks ** * witl1 A- salifications. Yes’ you program the new were so things you must also are certain There appraise whether it was suitable to coula answer, consideration. take into to enter suitable desirable in just I know that is one the ele- “Q. right? program, isn’t A. Yes. right, monts, what I isn’t that have re- j term Variable’ much more like the question my you? Not A. cited ‘risks’, simplifying You recited several elements. .... one. . ... Q' that would th“S again? goI over it “Q. Shall Tbat, anothf known, what the to be variables of Try stop guess- Court: Wait. “The You would nsks also A11'nS why asking ques- as to know what want the loss of ben point. anticipating Just tions program old if there efits under any were question get and we will answer loss, right Yes, isn t that A. ? * ** ninnO'hotter no losses. there * determining “Q: the suita- _ asking you I am about “Q- bility program such as the one that just program I am minute. presenting you wore Knoxes to be asking you generally. If there were finance, financed bank loan program, you the old losses one element at a —take time —it would Oh, what know were? A. want to one of elements to considered yes, were. if there of the elements to be or one is, considered existing program? finally, Just was there Next and order for it “Q. right? stop Yes, there. Isn’t A. there would be suitable have to be some understanding part that is I think true. reasonable right. buying it, All “Q. Number man that was how existing works, right? know want to what isn’t A. was, provided, coverage say Yes, what what I would so. This done provided, right? A. Our Yes. also.” schedule called for that. *11 premium ly collected would of make a total more than he would $6710. policies Based on the tax bracket interest he left his insurance mentioned, program. reason rates interest the net cost were under his old $17,580 $10,870 Knox himself would would for then be more this was that $100,000 plan York than the cost of the start new New old would out with a appear, calculation, policy old on even added to Stoessel’s Life Insurance initiating policies, policy, $23,000 be an excessive extra the new cost but indicated, previously bor- additional death he had to benefits.17 re- row from the cash substantial sums sliding The evidence showed this reducing policies serves of his thus old downhill amount of available protection year their in each there- protection only decreasing was not the after he had to borrow a bank aspect By plan. of the Anderson premiums payable each annual of $7265 policies conversions of the old insurance Although year year period. ten previously mentioned, the net insurance only plan contemplated he would in force under those 1953 was yet $7265, pay each the interest on $7792, permanent decreased “a loss”. year years during ten his bank family conversion also eliminated a increase another debtedness would provided income rider which insurance he like manner had to borrow $7265. in the nature of term insurance in the premiums Ellen’s account of the $10,000. family amount of That income year each thus enhance $3758 rider would have been until effective the total bank loan that additional family 1965. Of course at that time amount. provision income would have terminated any event, adop- but the effect was that at The net result tion of the Anderson with its con- years would owe the of ten end version of the old family cut this $125,000. could have died If he plan benefit off at once. years, pro- under this or three first two reap gram some would his beneficiaries Cleve, describing plan, Van noted from the Anderson benefits substantial pattern insurance under very taper plan; benefits off type program, bank loan is a policies, rapidly of his old and all because high start, going very rapidly down pledged new, required to be approximately half of the amount of.the loan; for the as collateral there- the bank years. at the end of insurance ten He amount collectible on death fore pattern said that not fit does in with remaining only the balance aft- apparent family. be needs of a In the Knox, payment bank. er situation with a wife and three children, small the last child would not. Stoessel, expert testify- Thus, even college through be until 1969. A suitable ing appellant, stated that for the program therefore should avoid death benefits between the difference being sharply just lowered at the time the new the old when it is needed the most. meantime, only $23,000. In the al- been though said, his old Knox under was needed he What a level per premiums year, up dur- paying $671 amount of about 1969- through years up 70-71; 1961 he the ten after which the children $29,000 pay self-supporting, tapering out excess be and that a $17,580 gross interest, satisfactory some in net off would as there would assuming interest, inwas the wife to look even after from 40% assuming bracket, This was one of interest on. several tax time reasons why Cleve used for calculation the sched- Van concluded rates that the Ander- years payments not a Ten of the old son suitable one for ules. require course, 17. And of after the first ten 000 would net annual interest $125,- $202(5 long loan, which had his bank reached as he lived. *12 714 pre- pay pattern had used to initial compared icies been the family. the He and his carry- policies miums New York Life the Knox had been of insurance which commission; which existing policies included the under his policy and the value Refer- remainder of that plan. up bank
pattern set in the pledged was. now the bank ring 4, he noted Exhibit schedule plan. loan bank policies life listed showed old there the $40,911. amount of insurance in the the Ander- Another result of adverse accumulating There dividends through were con- came about son which have at we shown that chart: “So policies old that after version the was increasing gradually $42,098 in- least changes made, certain educa- the protection was in force.” surance policies had earmarked tional which been family policy income in addition to the children, would for the education yet In addi- which 13 run. purposes for not be available those premiums had been tion some advance planned. for These were $5000 pol- paid on some Life Sun educational each, plus dividends, one to have matured so there icies event of death the for next child in another the $57,000 have insur- would been some life final one in the be- ance force ing approximately eighteenth birth- day of But the each these children. according Cleve, was a This, to Van chart, 10A, Exhibit showed that family at that program for the suitable pledged the collateral value of all average man than the better time —“far $98,787, and the loan bank would get salary He was to.” ever on this of 36 $97,413, be then since bank might beyond would not loan of the col- 95% by purchase of improved been have lateral, needed for oldest $5000 $25,000 insur- worth of additional $20 simply child 1959 would not be there. something ance, would not only way proceeds policy of that change contemplated the radical volved could have been in 1959 obtainable would plan. bank loan something pay been the bank over might Van Cleve respect which at which time it $4000 Another released. unsatisfactory periods beyond results elapse Similar adverse noted coming through purchase planned dates of 1961 1965 for about re- dissipation ceipt plan was the of the sums under the loan other bank two change-over through policies. emer- of certain educational were available un- gency which reserves testified that the also usual- Van Cleve pol- policy. Had those old der among good accepted practice ly life there would have alone left been icies permit policy not to underwriters through his bor- for available for more to contract holder rowing privileges substantial amounts comfortably afford. he could He than emergency, in an use explained in the event emer- of.an family or to take as sickness such lapsed gency policies often to the detri- go advantage opportunity to of an into holder and both ment Through business, the conversion etc. usually company; accepted that the safe changing policies and them these old 30’s, man in fam- limit borrowing, done to initiate the ily support, be a life gone. plan, this value was calling per for some 10 or cent gone approximately income,- because percent or twelve —“Ten $14,000 which was available the maximum about should should emergency aspect purposes pol- go.” On same under the old suita- 18. On assumption plan, Knox’s bank loan correctness $108,923, on which rates tax the total interest the interest bracket set total 10A, year. $3812 on Exhibit On the the final schedule would be forth assumption describing of a tax brack- exhibit’s furnished 40% *13 out, .judging bility plan, suitability testified Van Cleve also as to the of the among proposed program, in- most it is a standard rule fair allowance must contingencies. be companies insurance made for surance not to write Van Cleve selling in- testified pro- man’s annual more than ten one this times gram come; however, should Knox had ordered- take into when consideration cer- contingencies brought tain $100,000 policy, in- his and variables which approximately would particulars. important alter its surance to fifteen times usefulness in remarked, his income. As One Van Cleve variable was the tax “Frankly reviewing might this, bracket I which for was sur- Knox remain at prised $100,000 about was obtainable. Another variable was the 25%. get job interest. would I Van have been a difficult Cleve said that the inter- going est rate would instead of think.” down to 3.5% go well 5%, which would be plan sold that Anderson But the whole probable rate at which a loan would $50,000 Knox included another be made companies testified that life Ellen. Van Cleve themselves.19 having was no sound reason for there anywhere necessary outlay If the which Knox near that much insurance on carry wage would have to make to was not new Ellen’s life as she earner. program were based on an The timony well infer from tes- interest rate court could (which experience $50,000 later that the was writ- extra showed 5% case) upon Would primarily have been the ten to load Knox with insur- stipulated totaling tax 24.6%, bracket of ance nineteen times his annual then gross Knox’s interest for 1960 income. would have $5446.15, his net interest by An- furnished charts The various $4106.40, gross of his annual in- 40% caption: recited in their Knox derson to come. This preposterous would be a bur- dividends are not rates “Interest guaranteed.” den for a man in Knox’s situation. Ob- however, apparent, It is viously properly the court could hold that on those if the calculations which involved such contin- assump- upon unrealistic charts based gencies, possible real, so and so was not brackets, tax rates and of interest tions suitable for a earning man of Knox’s ca- bearing important alone has an that fact pacity. suitability upon In this same connection Van Cleve tes- entered safe the bank tified that financed insurance undertaking. hazardous or a justified any person could not be stated the in- None schedules whose taxes were under bracket. 50% used in the rates calculations but terest previously stated, gross As in- ' able to Cleve' was calculate them Van come was far below $24,000, figures shown. Exhibit 10A from stipulated it was would be the lowest percent 1953, 4.25 started reduced gross provide income which would a tax high 3.75% 4% With his actual 40%. in- continuing that rate stipulated come tax bracket at 3.5% 24.6%, pointed 1973. As counsel for Knox until we have to note here a further reason n would be et, $2287, formerly net interest banks that took such loans can- gross approximately income, celing of his them even if 23% offered them acceptable explained —double limits difficulty testified to He 5%.” taining in ob- supply Cleve and money Van this net inter- sure such as $2618, contemplated be est would here 26% banks because of come. fluctuations the demands which the banks many received. On the basis of testifying February, experience 19. Van Cleve was with bank loans on col- said that 1957. He the current in' rate for lateral the form policies, of insurance explained preceding a loan as of frequently December Van Cleve 5%, many “with bank loans were unavailable. 4%% why pro produce. Mrs. sented the financed this bank pol gram the other testified that when Knox.20 unsuitable icy May, said 1953, Anderson was sold in Cleve’s portion of Van Another retirement benefits problem of testimony dealt *14 per infer “around” month. $600 program as suitability Anderson the plain plan ence sold the was said He retirement. an or for investment purpose.22 suitable and valuable for that un an Knox was to sold age testimony at Van was Cleve’s neither provided suitable it one because policies would values the total savings retire nor desirable investment Anderson’s stated in be than those less justified the ment The evidence benefits. deducting the net, letter; after program was new court’s belief that actual $125,040 would total loan of provide represented would which as one this, ly beyond $92,576. But be According benefits. desirable retirement failed letter and Anderson’s schedules Kreidler, under Anderson to the witness surrendering pol aof to on disclose that program the basis to on took sell Knox’s icy the surrender between the difference providing when funds retirement it cost actual value of the and its age record does he reached 65.21 The (which interest would not include way of retirement moneys pre show how much in the paid pay the on to borrowed repre miums) and Kreidler benefits Anderson taxable.23 would be Appellant justify (1) 20. tries to liis use both it admissible to evidence was ground assumption intent, (2) braket evidence Anderson’s 40% “average” representation taken to be an was fact Knox, period years. being dependent made, braket for over this latter use nothing design There is in the record to show mis- of a the existence attaining Wigmore (Evidence ed.), represent. on ever that Knox could count 2nd $24,000 income, much less in- that his use and the § discusses the first 302 average (On come would much. Evi- ever in § second dence) 304. McCormick phases both 164. § discusses testimony 21. Kreidler’s as follows: Plainly generally evidence was suf- “Mr. he Anderson told Mr. Knox that to warrant the court’s treatment part ficient would have substantial increase of continuing of a this letter as protection surance at a reduction of dol- admissibility design As or scheme. Knox, lar cost at all to Mr. and that subsequent Wigmore statements, § see throughout program times entire 316. insurance, would have additional gross accumulating would val- have cash § 1954 Internal Revenue Code See dividends, ues and he later would be (e), 72(e), § 1939 Code § U.S.C.A. able to funds have retirement that would 22(b) (2) 22(b) (2) (A), 26 § U.S.O.A. ready be available when he was to retire (A). age at would also And he have edu- all Van Cleve calculated the cost of cational funds that would be available might policies which Knox have ready go his children when were and on under college, lived or if he if he died.” it was stated that he with- which September 14,- 1953, age 22. In his letter of draw cash at 65. This cost was cal- accompanied $134,109. Deducting which the schedule Exhibit this from culated 10A, $217,615 Anderson said: “The total cash actual value of would dis- you age 65, money profit. value at if leave the Van the taxable Cleve’s es- close companies, to accumulate with the will of the amount of such taxes timate approximately $226,000. paying high be After too have been he assumed the en- the bank off at that time would still amount of cash value in the tire approximately $100,000; leaving net of withdrawn would be rather than provide payment amount, This cash amount of after an the net annuity approximately per enough $600 month withdrawal of bank loan and cash your company Appellant pay tax, the rest of life.” with the under annuity option. contends that this letter was inadmissible The exact amount and irrelevant since it was sent taxes is material. The wit- after bought. Stoessel, expert, both had been But as Anderson’s esti- ness suggested 5, supra, Wig- tax, facts, in footnote both that state of mated $30,000. agree more and McCormick would would be buying just $41,753, what he it was what tax would But whether the costing $30,000, as figured, him. Van Cleve very a having estimated, it would Under Knox would Stoessel the new outlay substantial Instead have an amount. additional cash annuity $30,791. that stated sum for such as would amount to letter, assumption amount rates that the interest according barely sufficient, Van and the tax Ander- bracket used in annuity ap- Cleve, purchase an son If out- schedules were correct. According per lays proximately month. buy $300 calculated on the basis of Stoessel, than no more interest rate of and a tax bracket 5% selling per 25%, of outlay month. $300 $400 accumulated additional cash program, primarily $58,551. based on a certain 1971 would total We *15 ignored advantage, and tax Anderson have noted that those were realistic con- disadvantages tingencies. failed to mention the tax program. of that same say addi- on to what this Black went outlay in the cash would secure tional pro- question of whether On the way of additional death benefits money gram cost it would was worth including program a surrender the new undoubtedly him, credited the court program oth- Ellen Knox and value of the testimony Black Black.24 the witness pro- er cash benefits. would have on based calculations made mathematical $64,182 death cured additional benefits figures charts on Anderson’s shown manage in 1953. But if Knox did not for visu- his conclusions summarized time, die about additional large purposes were on charts which al benefits, previously death as we have figures thus in evidence. The introduced noted, rapidly; would diminish —accord- at expert arrived developed ing they $13,371 to Black would reach study long mathe- period after a gradually and then increase until analysis program. No use- of the matical they $25,129. 1971 when reach would by an exten- purpose be served ful would pro- testified that the Black summary arrived of the conclusions sive age gram Knox’s and earn- for man of Black, a mathematically by do but at ings excessively costly for that any beyond possible doubt the establish protection.25 amount of Ander- a mere examination fact that any pro- witness Stoessel26 was not enable or- charts would son’s question just hypothetical pounded conclud- dinary purchaser a to tell unskilled expert B, provided the amount of additional tbat as an 24. Black testified man, graduate Harvard benefits shown line 1 a of the Business death as experience program? exhibit, suitable with extensive same school my opinion accountant; public it is an insurance com- The Witness: Well as buy very manager experience pany men would it. I would not in estate few type Trust; coverage, planning an insur- because for Hawaiian recommend dollars, trading you putting salesman, deputy you are are and as ance same number was out almost of dollars where he chief ad- commissioner you year getting insurance, are officer the insurance laws each ministrative getting pro- Territory. is, increase of the costly.” It is tection. to assume that 1961 was asked 25. He $24,000 was J. Stoessel an associate income was from that 26. Walter agent general on, for National was in a Life Insur- and that he brack- time 40% Company. give He was man with et, his answer ance some those experience (which assumptions the insurance course the trial make). experience obliged had had who some not business His tes- court financing timony Assuming of insurance with “Q. was as follows: plan. $24,000 In this were in excess of he his income past on, with Anderson and that he was in a 40 associated portions bracket, had turned over per would a of his cent currently outlay, required son who to his as- cash additional cash business outlay with Anderson. Line 2 of sociated indicated on Exhibit 56- carry type permit some a man to ing query of bank He admit- program suit- financed insurance”. provide a insurance would tax ted this be about the minimum He answered: Knoxes. able “pretty plan work, program”. bracket to make the is a suitable I think it “Yes although directly line”, near the absolute bottom In this of course answer exception made plain- there testimony be some at odds with the young way up.” for “the man on his experts. tiff’s Judge could well conclude testimo- entire An examination suitability could cross Stoessel’s answer of ny Stoessel, direct both on obviously applied rea- be to Knox for examination, some reveal serves to minimum rejected nowhere near Stoessel’s why court the trial sons nothing bracket, be- and there was first difference Stoessel view. 40% reach- prospects of show that he had direct examination tween Stoessel’s stage such a of income. Cleve that Van that of Van Cleve’s only general opinion expressed his if ’agreed Cleve with Van Stoessel unsuitability he im- age and drew to retire chose plemented illustrations his answer with' surrender the cash down sufficient showing specific based on the schedules very loan, sub- pay the bank values to *16 why not considered reasons it could gain to have on would stantial tax position. in Knox’s for a man suitable he paid. cross-examination Also on previously enumerated These we have outlays to calculate was called testimony. describing Stoes- Van Cleve’s Knox would which for insurance general opinion simply expressed a sel kept his old to make had he suitability to not meet head-on but he did expense out-of-pocket compared to his difficulty points the various carry inquiry program. The new brought opinion been into the Van get Knox would made of him was what testimony. Cleve’s way protection and in- in the of added for the additional particular creased cash values In one mentioned Stoessel figur- got outlay. down When Stoessel what in the he said an item of benefit not proposed program, namely that he came out with conclusions the waiver substantially premium from those made contemplated different New York Black, thought policies. Van all of which Cleve Life He that getting having not disability, tended to show that he was event of Knox’s total money’s his worth for the out- increased remain without fur- effect lay, just previously payment premiums, noted. we ther fur- would nish Knox a substantial benefit. that at the initiation admitted Stoessel opinion main trouble with Stoessel’s program much of Knox’S’old new point explain is that failed he gone it and that would values cash money keep what Knox would use payments before take some up his interest on the bank loan if program new would values under the cash totally became disabled. they had been at the time what reach appar- was started. He it con- became the new On cross-examination expressed opinion Anderson that ceded ent that Stoessel’s suitability firmly protection provided founded.27 that He point plan reach a low would that the loan was one new admitted high 1961; and his cross-examination to “individuals served income attractive increasing that the When he was asked bene- brackets”. what to demonstrate tax hardly outlay per exceeded meant that he said: “40 fits thereafter cent objectives. agree part I that its identified as a situation of Ms own Stoessel agree opinion respect application prior published limited. I also agents plan following: of and “I should be aware held the bank busiy responsible opposed for their ethical conduct.” am solicitation of Ms when does not fit the client’s ness annually family respon- make have his heaviest that Knox would have to sibilities, pos- carry and it the worst program. would be pro- sible time for him die with low the trial to us manifest It is argue plan tection. To that a of that rejecting and fully justified in court was especially kind “is well to Knox’s suited general disregarding Stoessel’s (cid:127) needs”, completely power persuasive lacks suitability. with us. reply counsel In a brief argue Appellant undertakes next to demonstrate made a strenuous effort a mis- “was tax bracket appendix 40% with a series of schedules 20-year projected representation suitable program was the Anderson reflecting average reasonably Knox’s ex- his needs. adaptable to for Knox and well pected pattern.” is not There income is that All that need be said about for a record remotest unconvincing. basis completely finding reached would have first contention bracket, less that tax much 40% means and financial Knox’s within average bracket such. meet the ability carry he could because entirely from outlays required “almost attempted to it is schedule another non-salary) (i income.” e. investment contained demonstrate ag- showed the evidence Since support enabling Knox to mechanism non-salary salary gregate bracket he remained in even if 30% year, $10,000 a less than income was throughout for this basis his life. The how or (there proof toas no reliable is a scheme claimed demonstration increased), when this would have whereby from the borrow definitely man of modest Knox was merely annual the amount of the bank not *17 an income far modest come and of too premiums neces- also sums called for but wealthy man’s permit this him to afford sary pay permit him the interest financing.28 style of insurance Conceding loan. that this on the bank system and “not is “not recommended” say attempted that this Next it is says advisable”, appellant nevertheless especially program fine because was an Obviously with early that this could be done.29 greatest protection borrowings indebted- all extra an true, years. course, we that is Of approximately $125,000 be ness of would noted; is that but the trouble according appellant’s increased illus- rapidly protection that slides downhill so by by 1971, and we would tration noted, protection $8850 reach- Cleve Van assume if continued thus for that just minimum in at the time es its Marilyn daughter another ten the indebtedness would would be son when Jr., by Roger, approximately $17,000. Stephen, have increased and son 12. At years immediately time, and the few that situation could How this be said to be following 1961, preceding and Knox helpful per- or useful to Knox we cannot outlay $3062; what appel- 28. We cannot see difference would interest in 1963 of make whether amounts that Knox $950 lant would borrow so his actual carry pay outlay year had to in that would cash January February paid out of paid sal- how $2112. Just this could be sole- or his November and ly aries December sal- $1500 out of a investment income is non-salary aries, or out of his explained. income. The calculation is based of the matter is that upon The short he could interest which we have 3%% it, stated, and as Stoessel wholly not afford an unrealistic; noted is and it does beyond would have to be above or amount into not take account what the officers of tax income bracket make the the 40% say would the bank to a borrower who pretty plan work, “as this was near pay it his makes interest bottom line”. absolute owing borrowing to the bank the same scheme, assuming from the bank. Just when interest this claimed 29. Under a get bracket, would, according tired of such a customer 30% calculation, explained. appellant’s have a net Judge agree fully say warranted ceive; that we all can we findings system and conclusions as we have is “not appellant this with expressed. previously here recommended.” appellant which another schedule Question Fraud Of says “utterly tes- Cleve’s Van decimates” brings us to the consideration of timony bene- respect to retirement questions two think we must appellant at- plan, fits under together. question answered get first tempts Knox could to show how representation is: was the An annuity he reached month when $524 suitability pro derson as to the this age by handling his insurance gram representation gain of fact and not taxable in such a manner that no expression opinion? mere The second Assuming develop.30 all we this question assuming is: find here we contemplate appellant wonder how can fact, representation a statement projected of Knox at situation falsely fraudulently itwas made proved the and still time assert deceive, representa intent or was the plan a one.31 suitable disregard 32 tion made with reckless wheth unnecessary to comment er it or false ? was true in counsel’s other schedules some respect question, an exami- appendix. sufficient that With It is to the first deal- opinion problem, in our view confirms us with the nation them think we plan develops proportion annuity on this the taxable 30. The schedule of his appel- (we computing precisely use the as follows come. Without what just given) Appellant figures be, figured : this would lant’s under the that on all the rule of the 1939 assumes Code or under the 3% provisions Code, values of will be accumulated there of the 1954 $2400. would estimate, $220,219; the total loan this time be a fair think. we This would Figur- $132,803. premiums would be for ing make total taxable $3900. income of Assuming total wife, limit of value that Knox and his then- 95% being joint collateral, $139,793 past 65, worth collateral made a tax return bank; exemptions, left with the must be permit and where entitled to four $81,126 $227; the balance free their tax would be about this would' $100,000 time the withdrawal. At then be the maximum amount of tax saving through taking *18 policy cash New York would have a value credit for inter- suggests $80,800, appellant paid. so that of est This amount deducted from- policy loan, from $6640.15 this could be withdrawn the the interest on the bank policy give with bank and collateral the the would them a net annual interest annuity. charge exchanged an $6413.15. for This ex- of then We then have this- annuity change elderly couple during declining years, an for under the their option payment not would be taxable under Rev- harnessed with the $6413 a 1035(a) (1), year $7780, § Code 26 TJ.S.C.A. from a total § enue income of leav- 1035(a) (1) produce ing living expenses and would an an- for them their $1375 nuity, according year appellant, per $524 $114.16 to a a month. What coun- appellant But for month. program, the other feature of this sel omitted from this' appellant, in a the words of schedule is demonstration of how far go pay- “that Knox would all $114.16 leave other this sum of toward grocery with the bank secure and until the rent bill. proceeds at which Knox’s death time the Hong Hapai, 185, 188, Kim v. Haw. consequences.” are realizable without tax (1889): case, “But it would necessary 31. At that time Knox would show <be retired be not annuity per representations they $524 man with an month were made and that year per perhaps false, $1500 and invested income which are were ly sufficient year. per complaint, $7788 or a total His loan shown but also that be, they according ap- bank would were made the defendant with to which, pellant’s assumption, they $132,803 knowledge (or false, were with 5%, knowledge realistic interest true- at the rate of whether out contemplation false) annual $6640.15. interest would be His computed upon relying upon plaintiff’s tax be them also that income rely upon them, pre- plaintiff $1500 of investment did income which complaint.” sumably upon would still have and are shown facts applicable obviously expected for a fair statement of rely upon Ed. In like case statements. rule is to found be supra, Co., manner, gave if he this of suit- v. Woodruff assurance Barron Estate Co. ability 351, p. There when he knew that he had basis 126 P. no 163 Cal. general-. course, assertion, for is, such an liable he would be said: “It the court de- representa- ly speaking, this would a case of an action be true that disregard upon mere tion with reckless it founded ceit cannot be qual- opinion. expression was true or false. an But gen- of this ifications and modifications found, The trial court “That noted: important the rule are as eral rule representation suitability qualifications modifica- itself. Those ought known or to have been known to unnecessary is tions numerous. It defendant to be false and fraudulent and But, attempt all. them to illustrate plaintiff defendant to bearing expression anof mind that an rely upon buying intent that he it in said honestly made, expres- opinion, an if is integrated program.” F.Supp. [162 speaker to be of what believes sion inquiry 340.] Our is therefore whether n that, by fact, apparent it becomes finding supported by is evidence or expression one of a dishonest clearly whether it is erroneous. rely prac- upon it, deceit entitled In appellee his brief here the takes may worked, ticed, injury ac- and an pains attacking to state that he is not opinion of an ex- will lie. Thus the tion such; plan plan that that report employed pert a mine trial; and he concedes that under judg- expression would be but type some circumstances this though mistakenly, ment, honestly, if satisfactorily useful and suitable. cognizable course, injury made, no good law, equity, or morals could result. has That it usefulness in some instantly expert expresses But opin we noted at cases the outset of this though opinion, it still be dishonest However, apparent ion. it is that a mere opinion, he has made lia- himself an look at the characteristic features of the action for deceit.” ble apparent sufficient to make it any one, particularly trial recognized. generally a rule This is. judge, it contains within it features restated the Restatement has been inherently system readily which make it Torts, 542(a),33 Law of § sharp short, adaptable practices. general approval from the has received agent using system any insurance writers.34 text and familiar must be aware employing question trial the fact which the court had he must re any temptation pur was whether Anderson’s sist overreach a *19 consider opinion The court an honest one. chaser. could well find that statement of spoke must have in when Anderson he Anderson known that an If therefore plan use the bank or his statement to be discriminate of loan knew believed fraught liable, unwarranted, with hazards.35 false or Harper James, Antagonistic Opinion Torts, 34. & The Law of Par- of § 33. 542. “§ general recipient ty. in a 7.8: “The rule is The business trans- misrepresentation actionable, are not a fraudulent statements but action of opinion upon applies be noted that the rule un- maker’s recipient facts known should of the justified qualifiedly relying when the statement is of opinion par- stands alone and where transaction the maker thereon dealing length, at arm’s is material on an and the ties unless equal having footing (a) approximately holds himself as to ex- maker out as knowledge accessibility knowledge perience, special of of the matter which * * recipient have, the facts.” does (b) under this the comment section. See quotation from Stoessel’s 35. Note 27). (note supra, writing, ticularly B, plan up by in this wit- of the Chart made first weakness The arising temptation respect ness by from Black the schedules furnished its built-in Anderson, indicated, protection inflated commissions.36 out of eye- striking- justly judge plan raise trial could available ly deep takes a observing temptation during nosedive brows in overselling the first ten program. could large person in what he of the ly involved A who dies short- excessively properly purchasing after to be consider an insurance usually profits insurance; from term commissions. disadvantages its are obvious when it this dubious feature of The second sold under that title. A must salesman inducing plan Anderson’s is illustrated aspect know that this of the loan bank policies and him his old Knox to let plan readily pur- is not observable to a shortening change them convert chaser who is not himself an insurance borrowing payment, period for analyst. understanding difficulty of plan, produce loan funds for plan.39 extends to the whole un- pledging policies as collateral Finally, apparent plan. should be It is in course der that purchase comprehensive one that the process of a that Knox lost the benefit plan family kind, ac- rider and found his income such as the sold to one gone.37 a Knox, fraught cash values When cumulated with a number plan under circumstanc- bank loan is sold uncertainties, particularly chances and changing involving and conversion es person for a largely whose income is de- seller, policies, the purchaser’s old pendent upon earnings. We have known, must have was skirt- as Anderson noted heretofore that while the charts ragged edge “twisting”.38 furnished Anderson did not disclose the assumed inherently rate interest aspect obtainable A third dubious contemplated, for the loans is that the bank of insurance greater portion term insurance in its feature had assumed that for it resembles diminishing protection. rapidly program money As would be obtain- evidence, par- the charts introduced per able at annum. The court 3%% plain shows record Anderson’s the record that Knox pre- really commissions were of the initial was not familiar 40% with the value subsequent policies existing mium of certain of his 14% and as shall we premiums. selling justified Had Anderson note hereafter the court was type believing Knox the traditional that Anderson in the course premiums selling misrepresented that Van Oleve testified for of Ms the cost reasonably pay, example, H>ose values of and the and what premium $1000, happening annual Anderson’s to them. initial commission would have been $400. Cal.Ins.Code, 38. Of. § which contains sold, Under as indicated following paragraph: person “A 10A, Exhibit an- schedule net any representation not make shall or com- outlay $2G18 would reach nual in 1962 parison or insurers to an in- gradually increasing point. to that after misleading, pur- sured which is type policy had If a traditional been sold inducing pose tending to induce Anderson, pre- even an initial lapse, forfeit, change him to or surrender $2618, mium of commission insurance, temporary his permanent plan.” $1047. have been when An- But *20 sold those two derson premiums Upon $7205 annual with cross-examination Stoessel ad- $3758, $4409, previ- his commission was an mitted the correctness of his own altogether disproportionate ously published quali- amount to statement that “a fairly might presenting what be said to be Knox’s underwriter fied the will pay. ability purchaser to And it is be noted certain make the at least pay begin gen- funds to that came out of ac- the the understands what the scope coverage in old cumulated values Knox’s eral is under the new already charged which he had on been as well as under old the insurance.” which would a commission be added to policies. loading in the the
723
profit
$12,021
gamble
loss.
sumed
into a
$9250
awas
could well believe
salary
(Of
person
there
a
asked
course for
have
Knox should not
which
noted,
always
job or
is
hazard of loss of
Actually,
the
as we
to undertake.
pay.)
during
period for
reduction
the
interest
rates
bank
making
cal-
these
which Anderson was
things.
Anderson
all
He
knew
course
Of
nearer
culations ran
5%.
March, 1953,
admitted
at a meet
the
what
not
foresee
could
Florida,
he had heard a discussion
know
produce but he
future would
purchase plan
speech
of the
loan
in a
foresight
have that
was unable to
by
vice-president
a
York
made
New
either.
not tell
and that Knox could
prior
Life. This was
to the time he com
pleted
policy.
we
the sale of Ellen’s
tes
inherent herein
He
uncertainties
Other
outlining
points
speech
tified that
made in that
previously
discussed in
substantially
testimony
expert
On were
con
same
those
witnesses.
tained in a
New
possibility
tax bracket
circular
issued
25%,
may
any
York
Yan
Life Insurance
under date
at
time
Co.
exceed
February 19, 1953,
appli-
testimony
which was introduced
showed that
Cleve’s
the court
Exhibit
evidence in
below as
or uncertainties
cation of these variables
many
change
speaker noted
as-
operate
as-
27.41 The
the chart’s
could
I
ness.
refer
to the so-called ‘Bank
of the
that there
Van Cleve was
contingency,
Purchase Plan’
Loan
used
finance the
variable or
was another
purchase
Today
Congress
namely,
of life
after
mil-
sometime
insurance.
placed
might
business,
years
lions
new
revenue code
sev-
amend the
deductibility
highly respectable companies,
deny
eral
ing
of such interest.
is be-
impossibil-
legislation
financed
not an
that method.
That such
ity
suggested
purchase
fact that in 1954
“The sale and
motives
adopted
Congress
are,
believe, primarily
264 of the
Rev-
§
these cases
I
mo-
Code,
264 which
§
26 U.S.C.A.
sec-
enue
tives of self-interest —self-interest of the
agent
to in Knetsch
United
is referred
tion
States,
v.
to earn
commission and self-in-
affirmed,
Cir.,
200,
purchaser
gain
272 F.2d
terest
some-
with,
States,
361,
nothing.
quarrel
thing
United
364 U.S.
Knetsch v.
I
do
264 re-
§
and made restatement suffering who, ‘new’ fliction mental as a 46 as follows: “One without § so, intentionally Mich.L. privilege tort itself is contained in 37 causes to do full discussion is Rev. 874. It contains a another emotional distress to severe distress, (a) of the authorities and the statement liable for emotional * * * damages resulting (b) bodily ‘The rule that harm suffering cannot unaccompanied by mental be recovered it.” injury physical James, 18.4) Harper (§ noted that & wrong applicable complained of when the liability an extension of has been “There wrongdoer is a one intended willful along years.” In the this line recent feelings produce wound mental *27 Hambleton, 9 of United States v. case anguish suffering, or from which 568, 564, 566, Cir., F.2d A.L.R.2d reasonably such result antici- should be had occasion to at some this court discuss ” 50 pated consequence.’ as a natural length revamping the reason for the 1348 an inten- of then a case of 46 of the Restatement of Law We here § Torts, our discussion in connection with the defend- tional tort in the sense that Washington the State of disregard law of of the ant acted reckless adoption new at- court’s and that language rights plaintiff. upon question of of the courts titudes Bright Quinn, supra, such reckless v. damages recovery emotional dis- for for equivalent to an inten- indifference was Supreme Hawaiian Court The tress. rights. ques- The tional violation such gone along with these more recent has part such tion is whether conduct leading v. The case is Fraser advances. defendant the trial court has as Hospital, 39 Haw. Animal Blue Cross guilty of, actually found him caused early the court noted the There 370. calculated cause severe emotional refusing remedy for mental decisions plaintiff; and whether the distress to the suffering unless the same was connected properly could hold that such trial court injuries from in- suffered other with' was both unreasonable and such (p. conduct dependent court then said tort. The recognize recognize could defendant 373): cases “The modern likely to result mental distress and infliction mental suffer- intentional the ing standing alone, may, constitute tort illness. plaintiff sought simply case the In that demurrer to the com- 50. re- covery suffering alleged plaint for mental have been should sustained. The proceed- for been inflicted her because remanded further case telephone ings. calls numerous to her assume remand res- We demanding payment permit idence sums which amendments the court pleading The did not owe. court held the defective so as she correct complaint recovery was defective for for the failure to al- a case mental state lege suffering court held the acts of the defendant which the above beyond properly indicated, would be unreasonable bounds of recoverable decency intentional, so that the defendants should if the act unreasonable likely recognized recognize such acts as as should be to result and one such plaintiff. holding likely illness of the in illness. The to result right to had the trial court The McDONNELL, E.C. H. as Trustee in Re and conduct view the acts organization Equitable Plan Com entirety part collect of a their as a pany, Plaintiff-Appellee, large disre reckless commission v. gard proposed of what TABAH, Defendant-Appellant, Fred Knox, particularly to would do to existing A policies. Birrell, Smiley, Lowell M. Samuel J. part picture of the whole Schnider, Joseph Leznoff, Louis A. Har York New conduct was letter ry Workman, Simon, Harold J. Edward vice-president, Company’s Life Insurance Daspin, Kurlander, I. man, Sol R. Abe Weitz to, and its manifest effort above referred Aguilar-Leon, Juan F. De Raul extricating prevent himself Knox from Juan, Joseph Crosby, W. Susan R. Mil expense at minimum situation ler, Harry Cutler, Perlmutter, M. H. W. placed. court had been Corporation, Synta Bell Container Cor poration, Reg. regard Trust, rightfully Pan act of In could last American Corporation, vestment Charles Hold Anderson as a and inten further willful ings, Inc., Defendants. disadvantage tional effort Knox. We No. Docket 27259. fairly say think the court could all this known that Anderson should have United Appeals States Court of greatly Knox would be distressed Second Circuit. upset resources over loss of those Argued Nov. counting which he was for the education Decided Dec. of the children. (cid:127) damages We hold that the award suffering mental must be sustained. judgment affirmed. *28 Judge
CHAMBERS, (concur- Circuit
ring). gives foregoing exhaustive liability. short, I In no trouble as to me regard as a reasonable inference that figures given multiplicity enlighten intended to but were were not put a film sweet luseious-
intended the shell of a bitter cocoanut.
ness over damage to the element mental As yet say
suffering, am I cannot I satis- American Institute’s with the Law
fied day field. I be. Some work Hospital, Animal v. Blue Cross Fraser me, diversity convinces Haw.
case, I should concur the allowance item. another case from an- for that state, question will
other
reexamined. history itself, good repeats many If encouraged will men surance to be puts this decision their live-
alarmed jeopardy. is no There reason lihood The answer think so. is: “Read the hour full to do so.” facts —if