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Donald Hass, As Personal Representative of the v. Paul Wentzlaff

June 20, 2012

DONALD HASS, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF HARVEY SEVERSON, DECEASED,
PLAINTIFF AND APPELLANT,
v.
PAUL WENTZLAFF,
DEFENDANT, AND NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE, AND ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA,
DEFENDANTS AND APPELLEES.



APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA THE HONORABLE WILLIAM J. SRSTKA, JR. Judge

The opinion of the court was delivered by: Wilbur, Justice

#25904-a-LSW

ARGUED ON APRIL 18, 2012

[¶1.] Paul Wentzlaff, an insurance agent, stole thousands of dollars from Harvey Severson, an elderly man who asked Wentzlaff to help manage his financial affairs. Donald Hass, as personal representative for Severson's estate, sued Wentzlaff and two insurance companies who appointed Wentzlaff as an agent, North American Company for Life and Health Insurance (North American) and Allianz Life Insurance of North America (Allianz). Hass and North American each moved for summary judgment and Allianz joined North American's motion. After a hearing, the circuit court denied Hass's motion and granted the insurance companies' motion. Hass appeals, arguing that the insurance companies are vicariously liable for Wentzlaff's acts. We affirm.

FACTS AND PROCEDURAL BACKGROUND

[¶2.] Wentzlaff began working as an insurance agent in 1988. From 1988 through 1995, Wentzlaff was an agent for Aid Association for Lutherans, working in Colorado and Minnesota. Aid Association for Lutherans terminated Wentzlaff in late 1995 because of his sales practices, in part for not properly explaining a whole life policy. Wentzlaff then moved to South Dakota and worked as an agent for Kansas City Life and, in the late 1990s, for Lutheran Brotherhood. In 1997, Wentzlaff entered into a consent order with the South Dakota Division of Insurance under which he paid a $250 fine. Wentzlaff was penalized for promoting and advertising a seminar on then-recent federal legislation in a way that sought to influence the purchase of insurance through "fright and scare tactics."

[¶3.] In April 2001, Wentzlaff applied with North American. The application required that Wentzlaff disclose whether a complaint had ever been filed against him by a state insurance department, National Association for Securities Dealers (NASD), or another regulatory agency. Wentzlaff included a letter with his application, notifying North American of the 1997 consent order and attaching a copy of the order itself. In May 2001, North American received a supplement to the disclosure, explaining that the 1997 consent order involved an "advertising violation" and revealing that Wentzlaff was appointed as an agent by several other insurance companies. In August 2001, Lutheran Brotherhood reported that Wentzlaff failed to disclose or obtain approval for outside business and submitted non-genuine signatures on forms. Because of this report, the NASD suspended Wentzlaff from working with any NASD dealer for two years. Wentzlaff was also required to pay a $5,000 fine if he sought future employment as a securities broker for an NASD dealer. The report and subsequent consent order were based on Wentzlaff engaging in outside business activities without notifying Lutheran Brotherhood and for failing to disclose that he was both the existing agent and insuring agent on several insurance replacement forms.

[¶4.] Wentzlaff eventually started an independent insurance business. As an independent agent, Wentzlaff could write for any insurance company that appointed him as an agent. Wentzlaff applied to multiple insurance companies.

Wentzlaff was ultimately appointed by at least ten insurance companies, including North American and Allianz. Wentzlaff never considered one insurance company to be his primary company. In 2004, he formed Resource Development, Incorporated (RDI).

[¶5.] Joyce Farr met Wentzlaff sometime in 1999 when he spoke at her Lutheran church while he was working for Lutheran Brotherhood. Farr later became a client of Wentzlaff's, and Farr was pleased with his work. Around 2000, Farr introduced Wentzlaff to Harvey Severson, her brother and a retired farmer who had recently moved into an assisted living facility. Approximately six months after meeting Severson, Wentzlaff began assisting Severson with paying monthly bills and other financial affairs. Wentzlaff provided similar bookkeeping services to Farr. Wentzlaff would write checks and Severson would sign them. Wentzlaff charged Severson $200 per month, and later, $250 per month, for his bookkeeping services. Wentzlaff did not inform North American or Allianz that he was performing these services. Wentzlaff considered himself to be acting on behalf of RDI when providing the bookkeeping services.

[¶6.] When Severson and Wentzlaff first met, Severson had investments in mutual funds and annuities. Severson eventually authorized Wentzlaff to convert almost all of these investments into annuities with North American and Allianz. During this time, Wentzlaff indicated that he was with the Fellowship of Christian Estate Planners, Inc. Beginning in 2005, Wentzlaff began submitting requests to North American and Allianz to withdraw funds from Severson's annuities. The requests were signed by Severson. Wentzlaff told Severson that the money was needed to pay bills or that Wentzlaff would reinvest the funds. Wentzlaff asked that North American and Allianz directly deposit the funds into Severson's bank account, and the companies complied. Allianz and North American deposited funds into Severson's account; Wentzlaff then wrote checks from Severson's account payable to RDI, had Severson sign them, and deposited the money into RDI's bank account. With each withdrawal, Allianz and North American mailed a letter to Severson advising him of the withdrawal, any surrender charges, and potential tax consequences.

[¶7.] Wentzlaff provided similar services to Orlin Berge. When Berge's attorney became suspicious of Wentzlaff's practices, Wentzlaff prepared and

Severson signed a letter requesting the surrender value of the entire Allianz policy. Again, Allianz notified Severson of the request by letter and thereafter wired the funds into Severson's account. Severson then signed checks payable to RDI, and Wentzlaff used the Allianz policy funds to pay back money stolen in a similar manner from Berge.

[¶8.] Although some of the money was used to pay Severson's bills, Wentzlaff stole most of it, using the money for personal and business expenses and to cover his thefts from Berge's investments. In April 2007, a Minnehaha County grand jury indicted Wentzlaff on two counts of insurance fraud and eight counts of grand theft by embezzlement. Two days later, the South Dakota Department of Insurance issued an emergency order suspending Wentzlaff's license and mailed a copy to the insurance companies. Wentzlaff pleaded guilty to one count of grand theft of property received in trust and one count of committing a fraudulent insurance act. He was sentenced to twenty years in the state penitentiary and ordered to pay $472,000 in restitution.

[¶9.] Severson died in February 2008. North American paid Severson's estate $334,834.29 in death benefits in March 2008. Donald Hass, as personal representative of Severson's estate, sued Wentzlaff, North American, and Allianz. The complaint against the insurers alleged securities fraud, conversion, fraud and deceit, breach of fiduciary duty, and negligence, seeking to impose vicarious liability under the theory of respondeat superior.

[¶10.] Hass moved for partial summary judgment on liability. North American moved for summary judgment and Allianz joined North American's motion and all submissions in support of the motion. After a hearing, the circuit court granted the insurance companies' summary judgment motion. Hass appeals.

STANDARD OF REVIEW

[¶11.] This Court reviews entry of summary judgment de novo. Adrian v. Vonk, 2011 S.D. 84, ¶ 8, 807 N.W.2d 119, 122.

In reviewing a grant or denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.

Saathoff v. Kuhlman, 2009 S.D. 17, ¶ 11, 763 N.W.2d 800, 804. We have also noted that, while we often distinguish between the moving and non-moving party in referring to the parties' summary judgment burdens, the more precise inquiry looks to who will carry the burden of proof on the claim or defense at trial. Entry of summary judgment is mandated against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.

W. Consol. Coop. v. Pew, 2011 S.D. 9, ¶ 21, 795 N.W.2d 390, 396.

[¶12.] "Statutory interpretation is a question of law, reviewed de novo." State ex rel. Dep't of Transp. v. Clark, 2011 S.D. 20, ¶ 5, 798 N.W.2d 160, 162. "The purpose of statutory construction is to discover the true intention of the law, which is to be ascertained primarily from the language expressed in the statute." Id. Legislative intent is also "determined from the statute as a whole, as well as enactments relating to the same subject." Id. ¶ 10.

ANALYSIS AND DECISION

[¶13.] 1. Did Hass preserve the argument that there are genuine issues of material fact?

[¶14.] Summary judgment "shall be rendered . . . if the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law." SDCL 15-6-56(c). A party moving for summary judgment must submit a statement of material facts. SDCL 15-6-56(c)(1). A party opposing a summary judgment motion must include a "separate, short, and concise statement of the material facts as to which the opposing party contends a genuine issue exists to be tried." SDCL 15-6-56(c)(2); Discover Bank v. Stanley, 2008 S.D. 111, ΒΆ 23, 757 N.W.2d 756, 763. "The ...


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