Annette Billingsley v. Agribank FCB

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 96-3545
___________
All American Life Insurance Company, *
*
Plaintiff, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Arkansas.
Annette Billingsley; Andrew Vaccaro, *
Jr.; Joseph Vaccaro; Laurie Hiegel, *
*
Appellees, *
*
Agribank FCB, *
*
Appellant. *
___________
Submitted: May 21, 1997
Filed: August 29, 1997
___________
Before MURPHY, HEANEY, and MAGILL, Circuit Judges.
___________
MAGILL, Circuit Judge.
The All American Life Insurance Company (All American)
filed this interpleader diversity action in the district
court1 to determine whether the proceeds of Andrew
1
The Honorable George Howard, Jr., United States District Judge for the Eastern
District of Arkansas.
Vaccaro, Sr.'s $500,000 life insurance policy should go
to Agribank FCB (Agribank)2 or to Andrew Vaccaro, Sr.'s
four children: Andrew Vaccaro, Jr., Joseph Vaccaro,
Annette Vaccaro Billingsley, and Laurie Vaccaro Hiegel
(collectively, the Vaccaros). Andrew, Jr. and Joseph
owed $728,581.14 to Agribank, secured by the American
Life policy and a separate $500,000 policy from Executive
Life Insurance Company (Executive Life). The Executive
Life policy lapsed shortly before Andrew Vaccaro, Sr.
died. At the core of the dispute between the Vaccaros
and Agribank is whether the Vaccaros waived their rights
to the proceeds from the American Life policy and whether
Agribank is equitably estopped from disclaiming that
$464,447.623 of Andrew, Jr.'s and Joseph's debts was
satisfied by the lapsed Executive Life policy. The
district court found for the Vaccaros on these equitable
issues.
During the pendency of this appeal, Agribank settled
all of its disputes with Andrew, Jr. and Joseph.4
2
During its years of business with the Vaccaros, Agribank went through several
reorganizations. Agribank was formerly known as the Federal Land Bank of St. Louis
and the Farm Credit Bank of St. Louis. For the sake of consistency, we will only refer
to "Agribank."
3
The parties stipulate that, had it not lapsed, the Executive Life policy would
have been valued at $464,447.62 upon maturity.
4
Andrew, Jr. and Joseph also brought a tort claim against Agribank for
Agribank's alleged negligent impairment of collateral. A jury empaneled by the district
court returned a verdict for Andrew, Jr. and Joseph on their tort claim, and found
damages of $38,405. In addition to appealing the district court's equitable decisions
on waiver and estoppel, Agribank had originally appealed the district court's judgment
against Agribank on Andrew, Jr. and Joseph's tort claim, as well as the district court's
determination of Agribank's setoff rights.
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Agribank now appeals the district court's equitable
decisions
During the pendency of this appeal, Agribank reached a settlement agreement
with Andrew, Jr. and Joseph as to all claims. Agribank, Andrew, Jr., and Joseph
subsequently filed a joint motion to dismiss Andrew, Jr. and Joseph from this appeal.
We grant this motion.
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that Billingsley and Hiegel did not waive their rights to the proceeds from the
American Life policy and that Agribank is equitably estopped from disclaiming that
$464,447.62 of Andrew, Jr.'s and Joseph's debts--which were secured by the American
Life policy--was satisfied by the lapsed Executive Life policy. We affirm.
I.
Andrew Vaccaro, Sr., Andrew, Jr., and Joseph owned a
3200-acre family farming operation in Lee and St.
Francis Counties, Arkansas. Their corporation, Vaccaro
Farms, Inc. (VFI), operated from the 1970s until 1992.
In 1981, VFI borrowed $3,100,000 from Agribank to
purchase an additional 1800 acres of farmland. Shortly
thereafter, a series of factors proved the investment
ill-timed. See Trial Tr. at 119-21 (testimony of Joseph
Vaccaro). Andrew Vaccaro, Sr. suffered a heart attack
and underwent heart surgery. Flooding destroyed 80% of
VFI's 4000-acre wheat crop two weeks before harvest.
Diesel fuel prices doubled, interest rates stood at over
20%, there was a federally-imposed grain embargo, new
diseases were infesting crops, and commodity prices
dropped to a thirty-year low. The value of the land
purchased by VFI plummeted to 50% of its purchase price
within the first year of VFI's ownership.
VFI defaulted on the loan from Agribank in 1986, when
the loan's principal and interest amounted to almost
$3,700,000. VFI's attorney, Daniel Felton, negotiated
with Agribank and reached a mutually-agreeable solution.
All of VFI's 5000 acres of farmland was sold, and
$2,400,000 of the revenues generated from the sale went
to Agribank to partially satisfy Agribank's loan. VFI
continued to farm the land as a tenant farmer. Agribank
forgave approximately half of the remaining $1,300,000 of
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the loan, while Andrew, Jr. and Joseph each executed a
promissory note--one for $300,000 and the other for
$345,000--to satisfy the remaining half. Andrew Vaccaro,
Sr. was no longer liable for the original debt.
-5-
Andrew, Jr.'s and Joseph's notes were secured by a
lien on their remaining real estate, by a second lien on
crops and equipment, and by an assignment to Agribank of
the proceeds from the American Life and Executive Life
policies insuring Andrew Vaccaro, Sr. Andrew Vaccaro, Sr. had
originally purchased the policies to give his children an inheritance, and Billingsley and
Hiegel reluctantly agreed to assign the proceeds from the policies to Agribank.
Agribank reserved the right to make required premium
payments on the two life insurance policies, but was not
required to do so.
VFI was restructured as a partnership between Andrew,
Jr. and Joseph. In 1991 the partnership defaulted on the
notes, went into bankruptcy, and Andrew, Jr.'s and
Joseph's personal liabilities were discharged.
Prior to 1991, Andrew, Jr. and Joseph paid all of the
premiums on the American Life and Executive Life
policies--an amount over $250,000. While Billingsley and
Hiegel did not pay any of the premiums, they also did not
receive any income from the farming operation to which,
they assert, they were entitled. The premiums became
more and more expensive as Andrew Vaccaro, Sr. aged, and
in 1991 the combined annual premiums of the policies
amounted to approximately $56,000. By the end of 1991,
Andrew, Jr. and Joseph were unable to pay the premiums.
In late 1990, Andrew, Jr. and Joseph's attorney,
Daniel Felton (who had represented VFI), negotiated with
Agribank to have Agribank assume responsibility for the
payment of the premiums. John Jordan, the Agribank
Senior Special Credit Officer who serviced the loan from
1988 through 1991, handled the negotiations for Agribank.
-6-
The one offer Agribank made to become legally responsible
for the premium payments was rejected by the Vaccaros on
December 26, 1991, because it would have made Andrew
Vaccaro, Sr. again liable for the loan. Although not
legally responsible for the premiums, Agribank paid the
$9100 quarterly Executive Life premium for October 1991
on December 19, 1991.
-7-
In several "very frank" conversations with Andrew,
Jr. and Joseph, Jordan made it clear that Agribank knew
the importance of maintaining the policies. J.A. at Tab
77 (memorandum from Jordan to Don Zwicker, Regional Vice
President of Agribank). As early as December 31, 1990,
Jordan advised Agribank that "[i]nsurance premiums on the
required life insurance are extremely expensive, but the
borrowers [the Vaccaros] have continued to pay these
premiums. If they did not, I would recommend that
[Agribank] advance the premiums as, from a very 'cold'
perspective, insurance proceeds will likely eventually
allow the two notes to be paid in full." J.A. at Tab 76
(Loan Analysis Update). Prior to February 21, 1991,
Jordan again met with the Vaccaros. Describing this
meeting, Jordan wrote:
[W]e will be facing a problem next year. The
insurance premiums are now $56,000 per year.
[The Vaccaros] see no way to make these payments
and pay the higher payment schedule that will
kick in at that time.
We had a very frank discussion. They realize
their father is in poor health. They also
realize that the only way to ever pay the
$645,000 account is through the insurance. They
propose that the most important factor is to
keep the premiums paid. They further propose a
slight increase in the payment schedule, also a
possibility of lowering the level at which the
additional payment provision would kick in.
I am in full agreement with their general
proposal as I agree that the most important
factor is to keep the insurance in force.
J.A. at Tab 77.
-8-
Jordan communicated with the insurance companies
through Louie Devereux, Andrew, Jr. and Joseph's
insurance agent. Jordan learned that Agribank "[c]ould
use up all cash surrender value [of the policies] on
[the] front end. Would run each for one year or longer,
depending on interest rate." J.A. at Tab 84 (Aug. 30,
1991
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memorandum).5 In an Agribank "Loan Approval/Action
Worksheet," Jordan noted that "we don't have any choice
but to pay the insurance premiums." J.A. at Tab 86 (Nov.
26, 1991).
On December 26, 1991, after Agribank paid one
premium, Jordan and Felton had a final discussion
regarding the request that Agribank accept the legal
obligation to pay the life insurance premiums. In
memorializing this discussion on December 31, 1991,
Jordan wrote:
Telephone call to Dan Felton, Atty. Has had
further discussions with his clients. They just
simply do not want their father involved again.
That is why they gave [Agribank] everything they
did in 1986. Will not agree to our terms at
present. They also agree that the original
agreement already allowed for what they were
proposing and that they were raising the annual
payment amount. . . .
I reminded [Felton] that the account was
delinquent due to the insurance being paid.
That I would assume that a collection action
would be initiated. That regardless of what
happened from a legal standpoint (foreclosure,
bankruptcy, etc.) that [Agribank] would continue
to make the insurance payments and eventually
5
Devereux subsequently communicated with Executive Life that "[t]he assignee
[Agribank] is sending you a check from their St. Louis office under separate cover for
the quarterly premium due in October. They will send another quarterly premium in
January for the premium due 1/26/92." J.A. at Tab 91 (Dec. 19, 1991). Devereux sent
copies of this letter to Jordan, the Vaccaros, and Felton. While Agribank did make the
initial payment, Agribank never made the January 26 payment, nor did it notify the
Vaccaros or Felton that it failed to make the second payment.
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would be paid in full.
He is in basic agreement with everything and
hopes that his clients and [Agribank] can still
have an ongoing relationship, that the meeting
with the Little Rock attorney and/or the outcome
with the operating lender could change
everything.
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J.A. at Tab 98 (Dec. 31, 1991) (emphasis added). During
his conversation with Felton, Jordan also said that he
would always recommend that Agribank pay the premiums,
but that Agribank was not contractually required to pay
the premiums. See J.A. at Tab 132, 676-78 (testimony of
Felton).6
Shortly after his conversation with Felton, Jordan
moved to another position at Agribank and stopped
servicing the Vaccaro account. On January 16, 1992,
Kevin Schieber, the Manager of Special Credit for
Agribank, recommended in an internal memorandum that
Agribank "quit paying" the insurance premiums. See J.A.
at Tab 107 at 503. The memorandum noted that Executive
Life was facing bankruptcy and that the cost of the
premiums was likely to rise.
Thereafter, Agribank decided to stop paying the
insurance premiums. Agribank never notified Felton or
the Vaccaros of this decision. Andrew, Jr. and Joseph
continued to receive insurance premium notices on a
quarterly basis, but discarded them.
6
In a subsequent internal Agribank memorandum, Jordan wrote:
Telephone call from Teresa, insurance office, Ron Worth called from
Executive Life. Has check in hand and everything is taken care of until
1/26/92 installment.
Follow up to make sure a copy of the statement is received. I assume
[Agribank] will make that installment.
J.A. at Tab 102 (Jan. 2, 1992).
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Because no one else was paying the premiums, the
American Life and Executive Life premiums were paid out
of the cash value of the policies. The cash value of the
Executive Life policy ran out, and the policy lapsed in
April 1993. The American Life policy was still active
when Andrew Vaccaro, Sr. died on June 12, 1994.
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American Life brought this interpleader diversity
suit to determine whether Agribank or the Vaccaros should
receive the proceeds from the $500,000 American Life
policy. American Life was dismissed as a party to the
action, and the Vaccaros and Agribank were left to
litigate their rights to the American Life policy
proceeds. The principal issues raised by the Vaccaros
and Agribank were the equitable issues of waiver and
estoppel. The district court empaneled a jury, and
allowed the jury to sit in an advisory capacity on the
equitable issues.
The jury returned apparently contradictory advisory
findings that all four of the Vaccaros had waived their
rights to the American Life policy proceeds, and that
Agribank was estopped from receiving policy proceeds as
against Billingsley and Hiegel, but not against Andrew,
Jr. and Joseph.
The district court found that, at the end of December
1991, the Vaccaros reasonably believed that Agribank was
going to pay the insurance premiums, and that Agribank
had a duty to notify the Vaccaros that it was not going
to pay the premiums. Further, the court found that the
Vaccaros had suffered in reliance on Agribank.
Billingsley testified that she had the money to pay the
insurance premiums, and the district court found that the
Vaccaros would have paid the premiums had they known that
Agribank was not making payments. The district court
therefore held that Agribank was estopped from asserting
its assignments to the American Life policy proceeds.
The district court rejected Agribank's argument for
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waiver. While noting that "[t]he parties all agree that
the issues of estoppel and waiver are equitable . . .
[and] the Court must determine these issues," Mem. Op &
Order at 6, reprinted in J.A. at Tab 35, 240, the
district court's analysis of waiver did little more than
reconcile the jury's advisory finding of estoppel with
its advisory finding of waiver. The district court
stated:
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[Agribank] submitted the issue of waiver to the
jury. The jury was instructed that [Agribank]
had to prove the following: (1) that the
Vaccaros knew they had a right to the Executive
Life policy proceeds; (2) that they voluntarily
surrendered that right; and (3) that the
Vaccaros intended that they would forever be
deprived of the benefits of the Executive Life
policy proceeds. The jury found that all the
Vaccaros had waived their rights to the
Executive Life insurance policy proceeds.
Arguably, the verdict appears inconsistent;
that is, having found waiver, the Vaccaros
cannot prove estoppel. In an attempt to
reconcile the inconsistency, and in light of the
evidence presented to the jury, the Court is of
the opinion that the jury understood the
instruction to refer to the Vaccaros’ actions in
assigning the Executive Life policies to
[Agribank]. That is, based on the instruction
and the evidence, the jury could have found that
the Vaccaros had voluntarily assigned their
rights to the Executive Life policies. Such a
finding, however, does not preclude a finding by
the jury or the Court that [Agribank] is
estopped to enforce its rights under the
Assignment of the All American policy.
Furthermore, a finding of estoppel is consistent
with the jury's verdict regarding another action
by [Agribank], that is, that [Agribank]
negligently impaired the collateral.
Id. at 9-10, reprinted in J.A. at Tab 35, 243-44
(emphasis in original).
After adjusting for Agribank's setoff rights, the
district court ultimately allocated the American Life
policy proceeds to the parties in the following amounts:
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Agribank: $191,703.33
Billingsley: $134,919.16
Hiegel: $134,919.16
Andrew, Jr.: $ 39,067.50
Joseph: $ 39,067.50
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See Appellant's Br. at 14. The district court stayed its
judgment, however, and the American Life policy proceeds
remain in the registry of the district court. Agribank
now appeals.
II.
Arkansas state law applies in this case, and this
Court reviews the district court's interpretation of
state law de novo. See Salve Regina College v. Russell,
499 U.S. 225, 231 (1991). Findings of fact, however, are
reviewed for clear error. See Fed. R. Civ. P. 52(a).
Under Arkansas law, the determination of whether the
elements of estoppel have been met is a question of fact.
See Linda Elenia Askew Trust v. Hopkins, 688 S.W.2d 316,
319 (Ark. App. 1985).
The Arkansas Supreme Court has explained that the
following four elements are necessary to establish estoppel:
(1) [T]he party to be estopped must know the
facts;
(2) the party to be estopped must intend that
the conduct be acted on or must act so that the
party asserting the estoppel had a right to
believe it was so intended;
(3) the party asserting the estoppel must be
ignorant of the facts; and
(4) the party asserting the estoppel must rely
on the other's conduct and be injured by that
reliance.
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Office of Child Support Enforcement v. Wallace, 941
S.W.2d 430, 433 (Ark. 1997). "The party asserting
estoppel must prove it strictly, there must be certainty
to every intent, the facts constituting it must not be
taken by argument or inference, and nothing
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can be supplied by intendment." Ward v. Worthen Bank &
Trust Co., 681 S.W.2d 365, 368 (Ark. 1984).
The first and third of these elements have clearly
been satisfied. Agribank knew that it was not paying the
insurance premiums and Agribank knew that the premiums
were not otherwise being paid. Further, the Vaccaros did
not know that Agribank had decided to stop paying the
premiums and had in fact stopped paying those premiums.
We conclude that the fourth element has also been
satisfied in this case. Agribank asserts that the
Vaccaros were not injured by Agribank's failure to inform
them that it would no longer pay the premiums because,
even if Agribank had so informed the Vaccaros, the
Vaccaros still could not have paid the premiums.
Agribank acknowledges that Billingsley testified that she
could and would have paid the premiums had she known that
Agribank was not paying the premiums. See Appellant's
Br. at 42; see also Trial Tr. at 378 (testimony of
Annette Billingsley that she was prepared to pay $56,000
in annual premiums indefinitely). Because Billingsley
had never paid any premiums in the past, however,
Agribank essentially argues that this testimony should
not be credited.
While we agree that it is convenient for Billingsley,
after the fact, to declare that she would have been
willing to pay $56,000 in annual premiums indefinitely,
it is uniquely the province of the trial court to weigh
the credibility of a witness's testimony. See United
States v. Heath, 58 F.3d 1271, 1275 (8th Cir.) ("A
district court's determination as to the credibility of
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a witness is virtually unreviewable on appeal."), cert.
denied, 116 S. Ct. 240 (1995). Further, in light of
Andrew Vaccaro, Sr.'s failing health, the total value of
the life insurance policies, and the large amount of
money that the Vaccaros had already paid for the
insurance, we do not believe that the district court
clearly erred in finding that the Vaccaros could, and
would, have paid the insurance premiums had they known
that Agribank was not paying the premiums.
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The closest issue is whether Agribank acted "so that
the party asserting the estoppel had a right to believe"
that Agribank intended to pay the premiums. Wallace, 941
S.W.2d at 433. Based on the conversations between Jordan
and Felton, internal Agribank memoranda, and the letter
from insurance agent Devereux to Executive Life, we
conclude that it did.
Beginning in 1990, the Vaccaros communicated to
Agribank the importance of maintaining the life insurance
policies and their desire for Agribank to take over
paying the premiums. Agribank repeatedly acknowledged
its understanding of the policies' importance to
Agribank's loan, and indicated that Agribank would
continue premium payments if the Vaccaros were unable to
do so. Agribank never contradicted the specific
expectation, documented by insurance agent Devereux, that
Agribank would make at least the January 1992 payment to
Executive Life.
Agribank did, in fact, pay the October 1991 premium
payment. In the final meeting between Jordan and Felton,
Jordan specifically told Felton that he assumed that
Agribank would pay the upcoming premiums. The totality
of these ongoing discussions and reassurances, coupled
with the payment of a premium and no statement that
Agribank would discontinue payments, would, we believe,
have led virtually anyone to reasonably believe that
Agribank would continue paying the premiums.
Agribank raises a host of arguments why the Vaccaros
should not have relied on these communications. Agribank
suggests that the Agribank internal memoranda were not
relevant to a finding of estoppel because the memoranda
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were not accessed by the Vaccaros until after the policy
lapsed. This argument ignores that the memoranda
documented conversations between Jordan and the Vaccaros,
and were therefore relevant to indicate the content and
tone of the communications between Agribank and the
Vaccaros. Agribank further notes that Jordan was not the
ultimate decision maker at Agribank, and argues that
therefore the Vaccaros should not have relied on his
"assumptions." This disregards that Jordan was the
individual with whom the Vaccaros
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always communicated; while he may not have been the
ultimate decision maker, he was the individual who always
told the Vaccaros of Agribank's ultimate decisions.
Agribank raises two points which makes this a close
question, however. First, Agribank notes that the
Vaccaros rejected an explicit offer by Agribank to assume
legal responsibility for the premiums. In rejecting this
offer, Agribank contends, the Vaccaros cannot reasonably
expect to still receive the benefits of the bargain
without any of the liabilities.
The Vaccaros do not claim, however, that Agribank had
a legal obligation to pay the premiums. Immediately
after rejecting Agribank's offer, the Vaccaros were
reassured by Jordan that Agribank would continue paying
the premiums, although it was not legally required to do
so. By making this assurance and clarification, Agribank
effectively informed the Vaccaros that, although not
contractually required to make payments, Agribank would
continue to pay the insurance premiums. Accordingly,
this argument fails.
Finally, Agribank argues that the Vaccaros could, and
reasonably should, have independently learned that the
premiums were not being paid. For almost a year and a
half Andrew, Jr. and Joseph received premium notices from
Executive Life--notices which they discarded. Andrew,
Jr. and Joseph never contacted either the insurance
companies nor Agribank to ensure that everything was
proceeding according to their expectations. Because the
Vaccaros did not check on the status of the premiums,
Agribank contends, the Vaccaros had no right to believe
-24-
that Agribank was continuing payments.
It remains, however, that the Vaccaros never received
actual notice that the premiums were not being paid.
While a close question, we believe that it was reasonable
for the Vaccaros to presume that the premium notices were
informational only, and that Agribank was in fact
maintaining the policies.
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In sum, we conclude that it was simply inexcusable
for Agribank to do all that it did to assure the Vaccaros
that Agribank would continue to make premium payments,
and then to decide--without a single phone call or letter
to the Vaccaros--that Agribank was not going to make the
premium payments. Had Agribank notified the Vaccaros of
its intent to discontinue the payments, the Vaccaros
could have paid the premiums themselves. Accordingly, we
affirm the district court's judgment on estoppel.
III.
Billingsley and Hiegel assigned their rights in both the
Executive Life and American Life polices to Agribank.
See Mem. Op. & Order at 4, reprinted in J.A. at Tab 35,
238. In so doing, Billingsley and Hiegel expressly surrendered
all rights to the policies. See J.A. at Tabs 56 and 57
(assignments of rights to life insurance policies
proceeds as collateral). Agribank contends that this
surrender constituted a waiver under Arkansas law, and
that Billingsley and Hiegel cannot claim estoppel to recover any
part of the American Life policy proceeds.
The Arkansas Supreme Court has explained that:
Waiver is the voluntary abandonment or surrender
by a capable person of a right known by him to
exist, with the intent that he shall forever be
deprived of its benefits. It may occur when
one, with full knowledge of material facts, does
something which is inconsistent with the right
or his intention to rely on that right.
Lester v. Mount Vernon-Enola Sch. Dist., 917 S.W.2d 540,
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542 (Ark. 1996) (quotations omitted). Under Arkansas
law, waiver is usually a question of fact. See Bright v.
Gass, 831 S.W.2d 149, 153 (Ark. App. 1992).
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Agribank's argument for waiver is meritless. In
their assignment of their rights to the life insurance
policies benefits, Billingsley and Hiegel pledged
$1,000,000 of total benefits to secure approximately
$720,000 of debt. The assignment of benefits was
explicitly considered collateral. Indeed, in the
documents that executed the assignments, Agribank agreed
that "any balance of sums received hereunder from the
Insurer remaining after payment of the then existing
Liabilities, matured or unmatured, shall be paid by the
Assignee to the persons entitled thereto under the terms
of the Policy had this assignment not been executed."
J.A. at Tab 56, ¶ E, § 1 and Tab 57, ¶ E, § 1.
Clearly, Billingsley and Hiegel did not intend to "forever
be deprived of" the life insurance policies benefits.
Lester, 917 S.W.2d at 542 (quotations omitted). Rather,
they anticipated receiving over a quarter of a million
dollars when the benefits of the policies were realized
and the debts to Agribank were satisfied. In light of
this anticipation, which was supported by the assignment
documents, Billingsley and Hiegel did not waive their
rights to the life insurance policies proceeds.
IV.
For the foregoing reasons, we affirm the district
court's holdings that Billingsley and Hiegel did not
waive their rights to the American Life policy proceeds
and that Agribank should be estopped from disclaiming
that $464,447.62 from the lapsed policy did not go to
satisfy Andrew, Jr.'s and Joseph's debts.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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