Opinion
No. 1001926.
Decided February 22, 2002.
Appeal from Mobile Circuit Court (CV-2000-2771).
George Donoghue III seeks review of the Mobile Circuit Court's dismissal of his claims against American National Insurance Company ("American National") and its agent, Harold Knotts, Jr., stemming from Donoghue's purchase of life insurance from American National. Donoghue contends that the dismissal — based upon the trial court's holding that Donoghue's claims were not ripe for adjudication — was improper. We hold that the trial court correctly found that the claims were premature, and we affirm.
In November 1993, Donoghue, through Knotts, purchased a universal life insurance policy from American National. On August 25, 2000, Donoghue filed this action in the Mobile Circuit Court against American National and Knotts, alleging fraud, breach of contract, negligence, and conspiracy. The foundation of each of the claims in Donoghue's original complaint was the alleged misrepresentation by American National and Knotts that the "universal life insurance policy would meet his stated needs in that monies would be available at retirement."
American National filed a motion to dismiss (which Knotts adopted) pursuant to Ala.R.Civ.P. 12(b)(6), arguing, among other things, that Donoghue's claims were not ripe for adjudication and citing in support of its argument this Court's decisions in Williamson v. Indianapolis Life Insurance Co., 741 So.2d 1057 (Ala. 1999), and Stringfellow v. State Farm Life Insurance Co., 743 So.2d 439 (Ala. 1999). Donoghue then amended his complaint to allege (1) that before he purchased the policy Knotts had represented to him that the policy would provide a permanent life insurance plan as well as a separate "retirement fund"; (2) that his understanding was that his premium payments of $73 per month would cause this separate "retirement fund" to have in it $125,000 when he reached the age of 65, at which age he planned to retire; and (3) that he later learned that there was no such "retirement fund."
Following a hearing, the trial court granted the motion to dismiss, holding that Donoghue's claims were not ripe:
"This suit was filed in May 2000 and after receiving an initial motion to dismiss, plaintiff filed a first amended complaint in May 2001, focusing his claims, it appears, on alleged representations that the insurance policy he was solicited to purchase would provide a `retirement plan' as well as a death benefit. In the amended complaint, at Paragraph 10, plaintiff alleges that his `retirement plan' would `progressively reach $125,000.00 at age 65.' It appears to this court that plaintiff is making an effort to avoid the impact of recent Alabama Supreme Court opinions deferring `vanishing premium' claims until the date should arrive when the premiums had been, allegedly, promised to vanish. See Williamson v. Indianapolis Life Insurance Company, 741 So.2d 1057 (Ala. 1999); Stringfellow v. State Farm Life Insurance Company, 743 So.2d 439 (Ala. 1999); DeArman v. Liberty National Life Insurance Company, [ 786 So.2d 1090 (Ala. 2000)]. In paragraphs 10-16 of the first amended complaint, plaintiff repeatedly alleges that no `retirement fund' exists. However, plaintiff does not allege that he has attained age 65 and is entitled to benefits from a `retirement fund.'
"It appears to this court that the term `retirement fund' is simply another name for a policy cash value or pool of money allegedly promised to be on hand at retirement age, a date which has not yet arrived in the instance of this plaintiff. Plaintiff likens the situation to that in Boswell v. Liberty National Life Insurance Company, 643 So.2d 580 (Ala. [1994]). However, the Supreme Court, in Williamson, supra, explains that in Boswell, the plaintiffs were persuaded to purchase something that did not exist and never would exist, while in Williamson, the plaintiff purchased policies that might or might not perform in the manner which he was allegedly represented. Such is the situation here. Thus, as in Williamson, and the succeeding cases, plaintiff has suffered no discernible injury at this time. The issue is not ripe. The motions to dismiss of defendants American National Insurance Company and Harold Knotts are due to be granted; however, as in DeArman, supra, the court finds that plaintiff's complaint was filed with the bona fida intention of receiving an adjudication on the merits and, therefore, as in DeArman, the statute of limitations is tolled while this claim has been pending.
"The motions to dismiss filed by defendants American National Insurance Company and Harold Knotts are GRANTED, and this case is DISMISSED without prejudice. Costs having been prepaid, no further costs are taxed.
"DATED, July 17, 2001."
"/s/William H. McDermott
"William H. McDermott
"Circuit Judge"
Donoghue contends that the trial court erred in relying on Williamson,Stringfellow, and DeArman v. Liberty National Life Insurance Co., 786 So.2d 1090 (Ala. 2000), arguing that each of those cases involves "vanishing premiums" and therefore was decided based on a factual context wholly different from the one presented here. Donoghue agrees that in a "vanishing-premium" case (in which large premiums are paid over a short period with the anticipation that at some date in the future the premiums will "vanish," i.e., will no longer be required from the insured) a claim alleging that a plaintiff might have to pay premiums beyond the date on which the premiums were represented to "vanish" is not ripe for adjudication until a premium payment is made beyond the "vanish" date.See Williamson, 741 So.2d at 1060-61 ("Although there are projections suggesting that the agent's alleged representation [that premiums would `vanish' in 2002] was false, there is absolutely no way to know whether this representation was true or was false, until the end of the year 2002."); Stringfellow, 743 So.2d at 440-41 (claims filed in December 1997 were not ripe because they were based on an alleged misrepresentation that no premium payments would be required after July 11, 1998);DeArman, 786 So.2d at 1092 ("The DeArmans filed this action in January 1996, one year before the represented ['vanish'] date. Therefore, no cause of action had accrued when the DeArmans filed their complaint and no justiciable controversy existed.").
However, Donoghue argues that his circumstance is distinguishable from a vanishing-premium case in that he is alleging not that the policymight not perform as represented, but that it will not perform as represented, because no "retirement fund" exists. Because there is no "retirement fund," Donoghue contends that he has been paying for something that does not exist and that his claims are ripe under Boswell v. Liberty National Life Insurance Co., 643 So.2d 580 (Ala. 1994). InWilliamson, we summarized Boswell and distinguished that case from the "vanishing-premium" scenario as follows:
"In Boswell, this Court held that insureds could maintain fraudulent-misrepresentation and suppression claims based on their allegations that the insurer had persuaded them to surrender one policy and to purchase, for greater premiums, a policy that was represented to provide greater benefits. The basic question in that case was whether, given that the plaintiffs had made no claim under the policy, they had suffered any injury. This Court held:
"`The injury or damage alleged is that the plaintiffs were persuaded, through the fraudulent acts of the defendants, to pay for something they did not receive. In other words, the alleged injury or damage was the payment of greater premiums that were unnecessary because the plaintiffs received no additional coverage in return for the greater premiums and lost benefits they already enjoyed under the old policy.'
"Boswell, 643 So.2d at 582. Williamson argues that his case is similar to Boswell. We are not persuaded that it is.
"In Boswell, the plaintiffs were persuaded to purchase something that did not exist and never would exist. In the present case, Williamson purchased policies that will perform as he says he was told they would, if he dies before 2003 or if he does not have to pay premiums on the policies after the year 2002. In other words, because the performance of the policies is directly related to interest rates, Williamson today can only speculate that the policies will not sustain themselves as he claims he was promised."
Williamson, 741 So.2d at 1061.
While the distinction between vanishing-premium cases and Boswell is a real one, that same distinction cannot be made under the circumstances in this case. The only benefit Donoghue alleges he contracted for or American National, through Knotts, represented he would be entitled to is the payment by American National to Donoghue of $125,000 when Donoghue reaches the age of 65. Donoghue does not claim that he is entitled to any other benefit. For example, Donoghue makes no allegation that American National represented that it would hold the alleged "retirement fund" in a certain account or that it would oversee it in a certain way, nor does he make any allegation that American National represented to him that he would have access to the alleged fund, either to view the "progress" of the fund or to withdraw moneys from the fund. The only benefit Donoghue alleges he is due (from which an injury might arise if that benefit is denied) is that he would receive $125,000 when he reaches age 65. Therefore, because the mere payment of money from American National to Donoghue is essentially all that has been promised, it is all that can be expected, and American National could perform that alleged obligation in any number of ways when Donoghue turns 65.
While the trial court does not rely on this fact, we note it is undisputed that the policy (which is the only relevant written document that describes the relationship between Donoghue and American National) does not mention an alleged separate "retirement fund" at all.
Donoghue attempts to illustrate the distinction between the vanishing-premium cases and his case, using the following analogy:
"Mr. Smith convinces Mr. Jones to purchase his automobile by representing to Mr. Jones that the automobile has special valves and because of the special valves the car will get 35 miles to the gallon. However, the car must first be driven 50,000 miles in order for the valves to seat whereupon the represented gas mileage will be realized. Mr. Jones purchases the automobile but finds out from his mechanic after driving the automobile for 10,000 miles that there are no special valves in the automobile and he will never get 35 miles per gallon. Under the Trial Court's reasoning, Mr. Jones would have to wait until he drives the automobile 50,000 miles in order to sue for fraud. As we know, the statute of limitations starts to run when the mechanic tells Mr. Jones there are no special valves. Mr. Jones may immediately sue for fraud because all elements are met, i.e., a misrepresentation of material fact relied upon by Mr. Jones and resulting injury."
Donoghue's Brief, at 6-7.
The problem with Donoghue's analogy is that if the valves are not where they were specifically represented to be — in the engine, where the owner would always have access to them for any purpose he wished — then the car owner knows for sure that he will not receive the represented benefit. The car owner, at any time, has access to the valves and can examine or dispose of the valves in any manner he wishes; Mr. Donoghue, on the other hand, has no access or right of access to the funds until he reaches the age of 65. Mr. Donoghue has only an expectation that he will receive the funds at a later time.
Here, Donoghue does not allege that how the "retirement fund" was to be held or managed by American National was ever designated, nor is there any indication that Donoghue was told he would have any access to the fund prior to payment to him by American National of $125,000. All that is alleged is that American National has represented that a lump sum of money will be available to Donoghue when he turns 65. Therefore, because the "fund" is allegedly nothing more than money available at the time Donoghue turns 65, the "existence" of the fund could be determined only at that time.
Given the above, in accordance with the reasoning in Williamson,Stringfellow, and DeArman, we hold that Donoghue's claims are not ripe for adjudication. Therefore, the trial court appropriately dismissed the complaint.
AFFIRMED.
See, Brown, Woodall, and Stuart, JJ., concur.
Lyons, J., concurs specially.
Moore, C.J., and Harwood, J., concur in the result.
Johnstone, J., dissents.
In a "vanishing-premium" case, the insured is allegedly promised that he will have to pay premiums only for a fixed period and later learns that payments must be made beyond the "vanish date." In Williamson v. Indianapolis Life Insurance Co., 741 So.2d 1057 (Ala. 1999), in which I dissented, a majority of this Court held that a cause of action had not accrued in a vanishing-premium case when the action was commenced before the vanish date. The majority in Williamson cited Frith v. Guardian Life Insurance Co. of America, 9 F. Supp.2d 734, 738 (S.D.Tex. 1998), as an example of a similar result having been reached in other jurisdictions. Recently, in Asad v. Hartford Life Insurance Co., 116 F. Supp.2d 960 (N.D.Ill. 2000), another vanishing-premium case, the United States District Court for the Northern District of Illinois rejected Frith, stating:
"Hartford argues that Mr. Asad lacks standing because the complaint is not ripe. A claim is not ripe if it rests upon contingent future events that may not occur as anticipated or may not occur at all. Thomas v. Union Carbide Agricultural Products, 473 U.S. 568, 581, 105 S.Ct. 3325, 87 L.Ed.2d 409 (1985). Hartford says that Mr. Asad cannot allege injury on behalf of the trust until an out-of-pocket premium payment is made, citing Frith v. Guardian Life Insurance Co. of America, 9 F. Supp.2d 734, 738 (S.D.Tex. 1998); Solomon v. Guardian Life Insurance Co. of America, No. 96-1597 . . . (E.D.Pa. Sept. 26, 1997). It argues that Mr. Asad's claim rests upon contingent future events that may not occur as anticipated or may not occur at all. Thomas, 473 U.S. at 581, 105 S.Ct. 3325. Perhaps dividend payments and interest rates will make a miraculous recovery.
"However, in another similar case the Northern District of Mississippi found actual harm occurred when the plaintiff purchased the policy. Myers v. Guardian Life Insurance Co., 5 F. Supp.2d 423, 429 (N.D.Miss. 1998). I find Myers persuasive. The harm alleged is that the policy was not what Hartford represented at the policy's inception, not that the plaintiff is out money he will have to pay. Furthermore, the general rule for the statute of limitations on fraud is that it begins to run at the time the wrong was committed or the time when the fraud was discovered or could have been discovered through due diligence. United States v. Rita, 487 F. Supp. 75, 77 (N.D.Ill. 1980). Asad's fraud claims are ripe."
116 F. Supp.2d at 963 (emphasis added). The Court in Asad went on to observe that "Mr. Asad's contract claims are also ripe under an anticipatory repudiation theory." Id. No contract claim is before us.
Donoghue does not ask us to overrule Williamson; to the contrary, he attempts to distinguish it. Donoghue quite correctly notes that his is not a vanishing-premium case. However, I do not believe that this distinction prevents application of the rule in Williamson.
In Donoghue's amended complaint, he alleges that he was sold "a `permanent plan' of life insurance and a `retirement fund.'" He maintains that he understood that the retirement fund would have a value of $125,000 when he reached age 65. Presumably, Donoghue expected to pay his monthly premium of $73 every month pursuant to the terms of the contract. Donoghue further states that he has learned that he will not have a retirement fund as he contends he was promised. However, Donoghue has not yet reached age 65.
One can conclude from a fair reading of Williamson that a fraud cause of action against an insurance company for the anticipated nonoccurrence of an allegedly promised future event does not accrue until such nonoccurrence, even in the face of evidence of assurance from the company that the future event will not occur. I say that because the majority opinion in Williamson held that the claim was subject to the general rule that if the plaintiff has suffered no harm, loss, injury, or damage, then the plaintiff has no claim to be adjudicated, citing, inter alia,Pfizer, Inc. v. Farsian, 682 So.2d 405 (Ala. 1996) (holding that one who had received a manufactured heart valve could not recover damages based on speculation that the valve might fail). I attached as an appendix to my special writing in Williamson the withdrawn December 4, 1998, per curiam opinion of this Court, with which I had concurred. The appendix to my dissenting opinion attempted, albeit unsuccessfully, to distinguishPfizer:
"In that case, Pfizer did not admit that representations it had made regarding the heart valves might have been untrue. In this case, however, Indianapolis Life has acknowledged the possibility that representations made by one of its agents concerning the vanishing-premium policies might have been untrue."
Williamson v. Indianapolis Life Ins. Co., 741 So.2d at 1064 (Lyons, J., dissenting) (Appendix to Justice Lyons's Special Writing). American National's posture is no different from that of Indianapolis Life inWilliamson in the context of admitting that the future event will not occur. In addition to alleging that this action is premature, American National has defended this case by asserting the statute of limitations, arguing that Donoghue should have known more than two years before the commencement of this action that no retirement fund existed. I therefore cannot fault the trial court for following Williamson and rejecting Donoghue's claim as premature.
The effect of this application of Williamson will give Donoghue, if he chooses to continue to pay his monthly premiums and should he reach 65 years of age and should American National fail to deliver, at that time, the allegedly promised retirement fund in the amount of $125,000, a freshly accrued cause of action against American National for fraud. Donoghue's claim for punitive damages, assuming he can survive defenses such as lack of reasonable reliance, will certainly not be made any less attractive by evidence showing that he sued American National several years before and alleged at that time that he was not going to have a retirement fund, but that American National got his case dismissed by telling the court that he had sued too soon. Of course, at that time American National will have to defend the action without the availability of the defense of the statute of limitations and perhaps without the availability of living witnesses to contradict Donoghue's allegations.
The result in this case, compelled by this Court's holding inWilliamson, is unjust — not only to the insured but also to the insurance company. If the cause of action is deemed to have accrued, then questions of limitations and reliance could be disposed of while witnesses with undimmed recollections are available. Had Donoghue asked us to overrule Williamson instead of attempting to distinguish it, he would have had my vote. Then this case could be disposed of on its merits, to the benefit of all parties, at this time. However, in this state of the record, I must reluctantly concur.
I agree with the majority's decision to affirm the trial court's dismissal of George Donoghue's claims, but I disagree with the majority's rationale. I believe Donoghue's case is ripe for review, but should nevertheless be dismissed as being barred by the statute of limitations.
I agree with Justice Johnstone that Donoghue's case is ripe because Donoghue suffered a detriment as soon as he purchased the policy and began paying premiums on that policy, relying on the representation that the policy included an accumulating "retirement plan." I state first what is noticeably absent from the majority opinion: the standard of review in this case.
"`The appropriate standard of review under Rule 12(b)(6) [Ala.R.Civ.P.] is whether, when the allegations of the complaint are viewed most strongly in the pleader's favor, it appears that the pleader could prove any set of circumstances that would entitle [him] to relief. In making this determination, this Court does not consider whether the plaintiff will ultimately prevail, but only whether [he] may possibly prevail.'"
Cook v. Lloyd Noland Found., Inc., [Ms. 1991148, 1992201, September 7, 2001] ___ So.2d ___, ___ (Ala. 2001) (quoting Nance v. Matthews, 622 So.2d 297, 299 (Ala. 1993)). Donoghue stated in his amended complaint that Harold Knotts, Jr., had represented to Donoghue that the insurance policy would provide a "separate `retirement fund,'" and that Donoghue's policy payments would cause this "retirement fund" to grow to be $125,000 at Donoghue's retirement age of 65. The majority mischaracterizes Donoghue's allegation as a mere allegation that he is entitled to a certain sum of money ($125,000) at a certain age (65). Instead, when this allegation is viewed strongly in Donoghue's favor, as it must be, I believe Donoghue has alleged that he was promised that, and induced by a representation that, through his premium payments, he was paying into a separate, growing retirement fund.
Donoghue's allegation, at this point, entitles him to relief. He was allegedly induced to sign the insurance policy by, among other things, the promise of a separate and growing retirement fund that, as he discovered, never existed and never will. Donoghue was, like the plaintiffs in Boswell v. Liberty Natonal Life Insurance Co., 643 So.2d 580 (Ala. 1994), "persuaded to purchase something that did not exist and never would exist." Williamson v. Indianapolis Life Ins. Co., 741 So.2d 1057, 1061 (Ala. 1999). I believe that, therefore, this case is distinguishable from the "vanishing-premium" cases discussed in the majority opinion and that this distinction is significant to an analysis of Donoghue's allegation. Donoghue's claims are, therefore, ripe for review.
Nevertheless, I believe that because Donoghue's claims are barred by the applicable statutes of limitations, the trial court properly dismissed his claims. Donoghue's fraud claim is subject to the two-year statute of limitations. § 6-2-38, Ala. Code 1975. Donoghue signed the insurance policy at issue in November 1993. He filed this action on August 25, 2000, over six years after the alleged fraud occurred.
Donoghue attempts to protect his fraud claim from the bar of the statute of limitations by claiming that he did not discover the fraud until sometime after he signed the contract but no earlier than two years before he filed his claim. He cites § 6-2-3, Ala. Code 1975:
"In actions seeking relief on the ground of fraud where the statute has created a bar, the claim must not be considered as having accrued until the discovery by the aggrieved party of the fact constituting the fraud, after which he must have two years within which to prosecute his action."
(Emphasis added.) Donoghue argues that, under this "savings clause," his fraud action did not accrue until he discovered that no separate retirement fund existed — contrary to what Knotts had allegedly told Donoghue when he purchased the policy.
Even if we believe Donoghue's assertion that he only discovered that there was no separate "retirement fund" within two years of filing his claims, Donoghue's fraud claim is not saved by § 6-2-3 because Donoghue should have discovered from the insurance policy documents that there was no separate "retirement fund." In fraud cases, "the limitations period begins to run when the plaintiff was privy to facts which would `provoke inquiry in the mind of a [person] of reasonable prudence, and which, if followed up, would have led to the discovery of the fraud.'"Auto-Owners Ins. Co. v. Abston, [Ms. 1001565, December 14, 2001] ___ So.2d ___, ___ (Ala. 2001) (quoting Willcutt v. Union Oil Co., 432 So.2d 1217, 1219 (Ala. 1983)). It is undisputed that the policy at issue says nothing about a separate "retirement fund." Donoghue had this policy in his hands, at the latest, in November 1993. A reading of the policy would have revealed, to a reasonable person, this omission, and it would have "provoked inquiry" that would have led to the discovery of the fraud. Whether Donoghue actually read the insurance policy is irrelevant. "[T]he statute of limitations for fraud is not tolled by the failure of a person to read documents, including documents to which the person has affixed his or her signature." Parsons Steel, Inc. v. Beasley, 522 So.2d 253, 256 (Ala. 1988). Although Donoghue allegedly failed to discover the omission from the policy of a separate "retirement fund," the reasonable person would not have failed to discover it. Donoghue's fraud claim is therefore barred by the two-year statute of limitations and was therefore properly dismissed by the trial court.
Although the trial court dismissed Donoghue's claims as unripe and did not rely on or discuss in its order the statute of limitations, this Court may nonetheless affirm the judgment on that basis because "[a] trial court's judgment, if correct, should be affirmed even if the court has given a wrong reason in support of its judgment." Ex parte City of Fairhope, 739 So.2d 35, 39 (Ala. 1999); see also Steiger v. Huntsville City Bd. of Educ., 653 So.2d 975, 977 (Ala. 1995) ("A judgment properly entered will not be disturbed, even if it is not supported by the reasons stated by the trial court.").
None of the parties discussed Donoghue's remaining claims alleging breach of contract, negligence, and conspiracy. These claims, however, like the fraud claim, are barred by the applicable statutes of limitations and were properly dismissed. See § 6-2-34(9), Ala. Code 1975 (actions on contracts must be commenced within six years); § 6-2-38(l), Ala. Code 1975 (noncontractual injury to person or rights of another must be brought within two years). See also Bush v. Ford Life Ins. Co., 682 So.2d 46, 47 (Ala. 1996) (statute of limitations for negligence claim is two years); Travis v. Ziter, 681 So.2d 1348, 1350 n. 1 (Ala. 1996) (actions for civil conspiracy must be brought within two years); AC, Inc. v. Baker, 622 So.2d 331, 333 (Ala. 1993) (statute of limitations for contract claim is six years).
I respectfully dissent because, in my opinion, the plaintiff's civil action is not premature. I will explain.
The gravamen of Donoghue's complaint is that the defendants represented the policy performance — particularly the $125,000 in retirement funds at age 65 — as a promise when, in fact, that performance is a mere possibility at best. A policy of possibilities is, from its very inception, worth less than a policy of certainties. Therefore, if Donoghue's pleadings can be proved, he suffered a present detriment as soon as he, in reliance on the alleged misrepresentation, bought the policy and began payment of the $73 per month in premiums. In this sense, this case is like Boswell v. Liberty National Life Insurance Co., 643 So.2d 580 (Ala. 1994), cited by Donoghue and discussed in the scholarly main opinion. Therefore, the plaintiff's action against the defendants is not premature.
Today's decision will require Donoghue to throw good money after bad in order to obtain redress for the damage he suffered before he discovered the fraud. He must continue paying $73 per month for a policy of mere possibilities until he is 65 years old. In the event, likely according to his allegations, the policy does not pay him $125,000 when he is 65, he may then sue, according to the implications of the main opinion. If reasonable reliance be proved at that time, he will be entitled to recover the value of the policy as represented. Liberty Nat'l Life Ins. Co. v. Sanders, 792 So.2d 1069 (Ala. 2000).
What, however, will be the legal effect of his knowledge of the fraud on his reliance? While he will be able to contend that he relied on the misrepresentations in paying premiums before his discovery of the fraud, he will not be able to contend that, after he discovered the fraud — that is, after he discovered the falsity of the representations — he still relied on them in paying the subsequent premiums. Will we then hold that his initial reliance is enough to support his right to recover the value of the policy as represented? Will we hold that he should have mitigated his damages by cancelling the policy when he discovered the fraud, even though he thereby would forfeit his right to sue at age 65 according to the implications of the main opinion?
The holding that Donoghue's action is premature confronts him with the Hobson's choice of either cancelling his policy and forfeiting any remedy or maintaining the policy and exacerbating his present distress in the hope of recovering on a problematic fraud claim in the distant future. I respectfully submit that we should recognize the accrual of Donoghue's fraud claim and reverse the order dismissing Donoghue's civil action.