Midland National Life Insurance Company v. Johnson-Marin et al

Filing 98

MEMORANDUM AND ORDER. Signed by District Judge Monti L. Belot on 1/9/2012. (aa)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

MIDLAND NATIONAL LIFE
INSURANCE COMPANY,
Plaintiff,
v.
QUANETT JOHNSON-MARIN, et al.,
Defendants.

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CIVIL ACTION
No.

08-1367-MLB

MEMORANDUM DECISION
Introduction
This case began as and remains an interpleader action.
it

However,

has proven to be more complex than the usual interpleader brought

by an insurance company which simply seeks to be relieved from
liability to parties having disputed claims to, in this case, annuity
payments.
Midland National Life Insurance Company (Midland), an Iowa
corporation, issued three annuities to Quanett Johnson-Marin (JohnsonMarin) nominally as “owner.”

Johnson-Marin, a Kansas resident who is

in default (Doc. 21), sold the annuities to the Henderson defendants
(Henderson) which are located in Nevada and Delaware, in return for
a lump-sum cash payment.
resident of Kansas.

Rito Duque Ramirez (Ramirez) likewise is a

Both Henderson and Ramirez claim entitlement to

the annuity payments.

Johnson-Marin, for reasons which will become

apparent, makes no claim to the annuities.
diversity between the claimants.
with the clerk of this court.

Thus there is complete

Midland has deposited $114,205.08
Accordingly, the court has subject

matter jurisdiction, see 28 U.S.C. § 1335(a); General Atomic Co. v.
Duke Power Co., 553 F.2d 53, 56 (10th Cir. 1977), and the parties do
not contend otherwise.
Procedural Background
Midland filed this case in November 2008.

By March 2009, all

defendants had been served and the magistrate judge set a discovery
deadline of July 2009 (Doc. 20).

Thereafter all parties (except

Johnson-Marin) announced a settlement but in November 2009, this court
declined to approve the settlement.
In April 2010, Midland filed an amended complaint (Doc. 47) and
soon thereafter, Ramirez, Midland and Henderson each filed crossmotions for summary judgment (Docs. 52, 54 and 55).

The motions were

denied in October 2010 (Doc. 63) and reconsideration was denied in
December 2010 (Doc. 68).
2011 (Doc. 71).

The pretrial order was filed in February

A bench trial was conducted on August 2 and 31, 2011

and the parties’ final submissions were submitted by October 2011
(Docs. 91-93).

Here follow the court’s findings and conclusions

pursuant to Fed. R. Civ. P. 52.
Facts
1.

Jose Santos Hernandez Martinez died as a result of a

workplace injury.

Martinez’s surviving spouse, Rosa Delama Ramirez

De Hernandez (Ms. Martinez)1, and her three minor children brought a
wrongful death worker’s compensation claim in North Carolina against
Martinez’s

employer,

insurance carrier.

BB&K

Construction,

Inc.

(“BB&K”),

and

its

The parties settled the claim and BB&K and its

1

The parties also refer to Ms. Martinez as Rosa Del Lima Ramirez
Rodriguez.
-2-

insurance carrier agreed to pay a single payment in the amount of
$146,460.

The payment was made to The Jernigan Law Firm, counsel for

Ms. Martinez.

After deduction of attorneys fees and costs, $118,491

was paid to The Jernigan Law Firm “in trust” for Ms. Martinez and the
children (Exh. 483).

However, there is nothing in the record showing

that a “trust” was created.
2. The settlement agreement provided for The Jernigan Law Firm
to pay out the $118,491 as follows:
A. $17,784 to Ms. Martinez in care of her local counsel in
Texas;
B. $25,563 to The James Street Group for the purchase of an
annuity

for

the

benefit

of

the

minor

child

Rose

Angelica

Hernandez, sub-annuity to make equal monthly payments to Ms.
Martinez as the parent and natural guardian of Rosa Angelica
Hernandez, with the final payment on the annuity being on the
18th birthday of the minor child;
C. $36,467 to The James Street Group for the purchase of an
annuity for the benefit of the minor child Adulfo Hernandez
Ramirez, sub-annuity to make equal monthly payments to Ms.
Martinez as the parent and natural guardian of Adulfo Hernandez
Ramirez, with the final payment on the annuity being on the 18th
birthday of the minor child;
D. $38,677 to The James Street Group for the purchase of an
annuity for the benefit of the minor child Yerick Hernandez
Ramirez, sub-annuity to make equal monthly payments to Ms.
Martinez as the parent and natural guardian of Yerick Hernandez
Ramirez, with the final payment on the annuity being on the 18th
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birthday of the minor child.
3. On January 11, 2006, Johnson-Marin was named power of attorney
for Ms. Martinez and the children.
Spanish.

The power of attorney was in

When translated into English, it authorized Johnson-Marin

to “take all legal steps and formalities related to the death . . .”
of Martinez.

(Exhs. 505 and 506).

4. On January 23, 2006, the worker’s compensation settlement was
approved by the North Carolina Industrial Commission (Exh. 484).
5. On June 29, 2006, the North Carolina Industrial Commission
amended its order to allow the annuities to be purchased through
Millennium Settlements, a structured settlement firm located in
California (Exh. 485). Payments were to be directed to the account of
Johnson-Marin, as attorney-in-fact for Ms. Martinez, at Bank of
America.
6.

Bryan Milner, also known as Douglas Milner, is an agent with

Millennium Settlements.

According to testimony of Diana Ronald,

second vice-president of Midland, Milner provided Midland with three
fixed annuity applications, each dated May 15, 2006, which designated
Johnson-Marin as “owner” and “annuitant’s beneficiary” and the three
minor children as “annuitant.”

(Exhs. 486, 492 and 498).

designations were selected by Milner and Johnson-Marin.

The

Midland

relied exclusively on the language of the applications as to JohnsonMarin’s status (Ronald Tr. Doc. 97 at 55-56, 60-61).
authority to change the designations.

Midland had no

(Id. at 16-17). Although

Midland was aware that Johnson-Marin had a power of attorney and that
minor children were involved, Midland made no inquiry regarding
Johnson-Marin’s authority to designate herself as owner, even though
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Johnson-Marin did not purchase the annuities.

(Id. at 46-48). The

“owner’s beneficiary” designation on each application initially was
not completed.

However, later in 2006, Johnson-Marin amended each

application

designate

to

beneficiary.”
7.

the

children

as

the

“owner’s

primary

(Exhs. 490, 496 and 502).

The Midland annuity contracts were funded by separate checks

drawn on the Jernigan Law Firm.

Each check was dated June 29, 2006

and was payable to Midland National Life in the amounts specified in
paragraph 2 B, C and D, supra.

(Exhs. 512, 517 and 520).

The “memo”

portion of each check listed the respective minor child’s name.
8.

Each annuity contains the following:
Section 1: DEFINITIONS

Annuitant:
The person(s) named in the application and on the
Specifications Page to whom periodic income will be paid. This
is the person whose life is used to determine the amount and
duration of any periodic income involving life contingencies.
The Annuitant will be considered the Owner of the contract
unless otherwise stated on the application.
* * *
Owner: The person(s) or entity named in the application or the
latest change filed with Us who is entitled to exercise all
rights and privileges provided in the contract.
* * *
SECTION 4: ANNUITANT, OWNER, AND BENEFICIARY PROVISIONS
Ownership: This contract belongs to You. You have all rights
granted by this contract, including the right to change Owners
and Beneficiaries, subject to the rights of:
a) Any assignee or record with Us;
b) Any irrevocable beneficiary; and
c) Any restricted ownership.
We must receive Written Notice informing Us of any change,
designation, or revocation. Once recorded, a change, designation
or revocation takes effect as of the date the Written Notice was
signed.
However, We are not liable for payments made by Us
-5-

before We record the Written Notice.
(Exhs. 401, 429 and 456).
9.

In letters dated July 12, 2006, Milner provided Midland with

the Spanish language version of the power of attorney the status of
the annuitants as minors and residents of Mexico and information
regarding electronic transfer of the annuity payments to MarinJohnson’s account at Bank of America (Exhs. 507-511).
10.

Milner was persistent in checking the status of the annuity

applications and often experienced delay. From July 13 through August
24, 2006, Milner made 10 phone calls checking on the status of the
annuity applications.2

During these calls, Milner repeatedly stated

that Johnson-Marin was the power of attorney for the annuitant
children in Mexico.
11. Milner was not licensed in Kansas at the time the annuity
applications were initially signed and Midland needed a new page after
Milner received his Kansas license.

The new “sign date” was July 21,

2006.
12.

On July 28, 2006, Milner was informed that Midland was in

the process of reviewing the Spanish language power of attorney.

The

Midland representative indicated that she hoped there was someone
“here” who could interpret the power of attorney.

(Plaintiffs’ Exh.

2). There is nothing in Midland’s files to indicate that Midland ever
translated the power of attorney into English (Ronald Tr. Doc. 97 at
38, 45).
13.
2

On July 31, 2006, Milner was informed that Midland’s

These phone calls are recorded on Plaintiff’s stipulated exh.

2.
-6-

assistant manager and supervisor were reviewing the applications
because the three children lived in Mexico.
14. On August 3, 2006, Milner was informed by Midland that he
needed to submit additional forms before Midland could issue the
annuities, one of which was necessary because the children lived in
Mexico.
15. On August 23, 2006, Milner was told that Midland could not
issue the annuities with the payment schedule that Midland’s marketing
department had initially quoted.

Nevertheless, the specifications

page of each annuity lists the “issue date” as July 21, 2006.
16.

After Midland issued the annuities, the payments were sent

to Johnson-Marin’s Bank of America account.

On February 16, 2007,

Johnson-Marin called Midland regarding an error on her 1099-R form.
During this phone call, Johnson-Marin explained to Midland that she
was holding the annuities for the children.
17. On November 16, 2007, Ms. Martinez signed a second Spanish
language power of attorney, this time appointing Rito Duque Ramirez
to handle all business matters related to the annuities.

Ramirez is

said to be the Martinez children’s great uncle who had been in a
previous “relationship” with Johnson-Marin.

The translated document

states, inter alia, that Ms. Martinez does not want Johnson-Marin to
have anything to do with “the matter” and that Johnson-Marin had not
remitted to her the annuity payments made by Midland on the three
annuities for the previous four months (Exh. 523).

There is nothing

in the record to indicate that the second power of attorney, either
in original Spanish or in English, was sent to Midland in November
2007.
-7-

18.

For the tax year 2006, Midland issued three forms 1099-R

reflecting distributions to Johnson-Marin totalling $4,815.35 (Exhs.
491, 497 and 503).

For tax year 2007, similar forms reported

distributions totalling $11,508.84 (Exhs. 488, 494 and 500).

All

together, Midland made payments to Johnson-Marin from September 2006
to January 2008 (Ronald Tr. Doc. 97 at 20).
19.

The record is silent with respect to Johnson-Marin’s use of

the distributions.

She appeared pursuant to subpoena at the August

31, 2011 hearing but declined to testify on the basis of the Fifth
Amendment.
20.

Sometime around January 2008, Johnson-Marin contacted

Henderson regarding the annuities.

According to Lauren Capriotti,

Henderson’s assistant general counsel, the initial contact would have
been by phone or through Henderson’s website.

A sales representative

contacted Johnson-Marin who told her to “. . . send in whatever
documentation . . .” she had.
that Henderson could

The documentation was then reviewed so

“. . . decide if they had what we think is a

valid annuity that they could sell.”
21. The documentation consisted of “specification pages” and the
evidence on this point is discrepant.

The specification pages

attached to the Henderson Purchase Agreements show Johnson-Marin as
the “owner” of each annuity.
(Exhs. 402, 430 and 457).

There is no designation of “annuitant.”

However, the specification pages for each

annuity as issued by Midland show Johnson-Marin as “owner” and,
respectively, each child as “annuitant.”

(Exhs. 401, 429 and 456).

According to Ronald, the specification pages attached to the Henderson
Purchase Agreements are not Midland documents.
-8-

(Ronald Tr. Doc. 97

at 29, 30).

There is nothing in the record to definitively resolve

the discrepancy. The person or persons who reviewed the documentation
are no longer employed by Henderson.
22.

(Capriotti Tr. Doc. 90 at 6-8).

Henderson’s files contain numerous additional documents

relating to the sale of the annuities by Johnson-Marin to Henderson
but the Midland annuities themselves are not among them.

Capriotti

identified letters dated January 11, 2008 signed and sworn to by
Johnson-Marin on January 16, 2008 authorizing Midland to send copies
of the annuities to Henderson (Exhs. 412, 440 and 467).

The parties

have stipulated that Midland’s files reflect receipt of these letters
on January 23, 2008. Henderson may have made phone requests for the
annuities as well, but there are no records of the requests in its
files.
from

Midland’s phone records do not contain telephonic requests

Henderson

for

the

annuities.

This

is

another

unresolved

discrepancy but even if Henderson had made the telephonic requests,
Midland would not have honored them because it considered JohnsonMarin to be the owner of the annuities.

(Ronald Tr. Doc. 97 at 23,

39-45).
23.

By letters dated January 11, 2008 and signed by Johnson-

Marin before a notary on January 16, 2008, Johnson-Marin notified
Midland that Henderson is the “. . . new, Payee, Owner and as
beneficiary of my . . .” annuities.

(Exhs. 410, 438 and 465).

Another trio of letters dated January 11, 2008 addressed to Midland
and signed by Johnson-Marin before a notary on January 16, 2008
represented, as follows: “I certify that I am the payee under the
annuity contract and have sole authority over rights to payments there
under [sic].

I certify that I am the only individual entitled to
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benefits under the Annuity Contract.”

(Exhs. 413, 441 and 468).

There followed letters dated January 22, 2008 from Henderson to
Midland

attaching

forms

“.

.

.

necessary

to

make

an

absolute

assignment of payments, a change of beneficiary and a change of payee
. . .” on each annuity (Exhs. 421, 449 and 476).

The letters were

stamped “received” by Midland on January 23, 2008.
24.
by

Even after Midland received the transfer documents signed

Johnson-Marin,

it

did

not

send

the

annuities

to

Henderson.

Capriotti testified that Henderson did not receive the annuities it
requested and, in fact, did not see the annuities until two days
before the August 2, 2011 hearing (Capriotti Tr. Doc. 90 at 16-17).
Capriotti admitted that it was common for Henderson to make purchases
without first obtaining copies of the annuities (id. at 43).
25.

Similarly, the worker’s compensation settlement documents

and the power of attorney to Johnson-Marin are
Henderson’s files (id. at 20 and 27).

not contained in

Capriotti testified that

Johnson-Marin, representing herself as the “owner and payee” of the
annuities, gave Henderson written consent “. . . to the release of
‘legal

or

financial

records’

requested

by

[Henderson]

and

to

Henderson’s verification of information in the submitted documents as
well as personal consumer information.”

(Exhs. 414, 443 and 470).

There is nothing in the record to indicate that Henderson used this
consent prior to purchasing the annuities.
26.

The “Purchase Agreements” for each annuity were signed by

Johnson-Marin, by her husband and by a representative of Henderson on
January 16, 2008 (Exs. 402, 430 and 457).
pertinent part:
-10-

The Agreements provide, in

PURCHASE AGREEMENT
This is a Purchase Agreement. The date of this Agreement
, 200 8 . Quanett Johnson and 3
is
Jan. 16
is the Seller. 321 Henderson Receivables Origination LLC,
a Nevada Limited Liability Company, its successors and/or
assigns is the Buyer. In this Agreement, Quanett Johnson
is the Annuitant and 3 is the Owner, collectively they will
be referred to as “You” or “Your” and 321 Henderson
Receivables Origination LLC or its nominee, is referred to
as “We”, “Us” or “Our”.
BACKGROUND OF THIS AGREEMENT
1. On ____________________, You purchased an annuity
contract (“Annuity”) from Midland National Life Insurance
Company (the “Annuity Company”). Under the terms of the
Annuity, You are entitled to receive certain payments (the
“Payments”).
2. You desire to sell, assign and transfer to Us all
of Your rights to all Payments under the Annuity, as
described on Exhibit “A”, all of the other rights You have
under the Annuity and the other rights as described in
Section 1(a) below.
We desire to purchase all of Your
rights and benefits, on the terms and under the conditions
described in this Agreement.
3. The list of the Payments being sold under this
Agreement is attached to this Agreement as Exhibit “A”.
You have supplied us with a copy of the Annuity.
You and We agree as follows:
1.

Purchase and Sale
a.

You now sell, transfer and assign to Us all
of the Your respective rights in the
Assigned Assets. As used in this Agreement,
the term “Assigned Assets” means (1) the
Annuity Policy, (2) Your rights to all
Payments under the Annuity, (3) the Payments
listed in Exhibit “A”, (4) all of Your
present or future rights to sell assign,
transfer, cause an early termination of,
modify, waive, settle, or receive value for,
the Payments on Exhibit “A” and (5) all of
Your other rights, if any, under the
Annuity. By Our signing this Agreement, We
are hereby purchasing and accepting the

3

These blank spaces appear in the Agreements.
-11-

sale, assignment and transfer of all of the
Assigned Assets described above.
b.

The Gross Purchase Price purchase price is
Twenty Thousand Dollars And No Cents
($20,000.00).
The Net Purchase Price
payable to You is $20,000.00 (The “Purchase
Price”) (the “Purchase Price”)..
The
Purchase Price will be paid to You when both
You and We sign this Agreement and You have
delivered to Us all of the documents You are
required to deliver pursuant to the terms of
this Agreement, We have obtained the written
acknowledgment of the Annuity Company of the
proposed sale and such Annuity Company has
acknowledged on its books and records that
We, or our assignee, is the owner,
beneficiary and payee of the Annuity and the
Assigned Assets, and We have otherwise
completed Our internal process. You agree
that the Purchase Price received by You will
be allocated between the Owner and Annuitant
as Owner and Annuitant may separately agree.

(Exh. 402 at 1-2)(emphasis supplied).
27. As part of the purchase transaction for each annuity,
Johnson-Marin signed disclosure statements confirming, inter alia,
that the effective date of each agreement was the date it was signed
(Exhs. 406, 434 and 461).

She also signed Special Irrevocable Powers

of Attorney dated January 16, 2008 stating and acknowledging that she
had sold, transferred, and granted a security interest in and conveyed
the annuities to Henderson and irrevocably appointing Henderson to act
for her behalf with respect to the annuities (Exs. 407, 435 and 462).
28.

In consideration of her sale and transfer of the three

annuities, Henderson paid Johnson-Marin $49,000 or approximately 42%
of the aggregate amount of the purchased annuity payments.
29. The minor children were not identified by name or in any
other

manner

Henderson.

in

the

documentation

provided

by

Johnson-Marin

to

However, a trio of letters dated February 5 and 6, 2008
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from Midland to Henderson directed to the attention of Jamie Muse
identified Johnson-Marin as the “owner” of the annuities and named
each child as the “annuitant.”

The letters did not specify that the

annuitants were minors. Each letter stated, inter alia: “We [Midland]
have approved the absolute assignment to R.C. Henderson trust FBO
[name of annuitant] . . . .
irrevocable.”

Please note this assignment will be

(Exs. 422, 450 and 477).

The letter represented by

Exhibit 422 was resent to Henderson by email dated February 12, 2008
(Exh.

423)

Each

document

bears

the

handwritten

note:

“Absolute

assignment, irrevocable” with initials which are not identifiable.
According to Ronald, Midland had no power to stop the assignment of
the annuities to Henderson because Johnson-Marin was the “owner of the
contracts.” (Ronald Tr. Doc. 97 at 27, 28).

The letters alerted

Henderson to the annuities being for the benefit of third parties, but
Henderson did not follow up.

(Capriotti Tr. Doc. 90 at 60-61).

30. Midland prepared and presumably sent to Henderson two checks
dated February 14, 2008 which noted “FBO” followed by the names of two
of the annuitants (Exs. 518 and 521).
31.

By letter dated February 28, 2008 and received by Midland

on February 29, 2008, counsel for Ms. Martinez notified Midland that
the power of attorney previously given to Johnson-Marin was “revoked
and rescinded” and instructed that payments due on the annuities be
remitted to Ramirez.

Martinez’s counsel did not notify or make a

similar demand on Henderson (Exh. 504).

Counsel sent a follow-up

letter to Midland dated March 5, 2008 (Exs. 524 and 525).

There is

no evidence that Henderson received either letter.
32.

By letter dated May 8, 2008, Henderson sent Midland “. . .
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. forms necessary to make an assignment of payments, or change of
beneficiary and change of payee” on Johnson-Marin’s policy as well as
a letter from Johnson-Marin (Exh. 515). The forms, signed by JohnsonMarin and her husband, Martin Marin Lopez, are dated May 8, 2008.
Henderson is identified as the “new owner” on each form (Exh. 514).
Summary of Parties’ Positions
The following summary is taken from the pretrial order (Doc. 71)
and the parties’ trial and post-trial submissions (Docs. 87 and 91
[Midland]; Docs. 83 and 93 [Ramirez] and Docs. 82 and 92 [Henderson]).
Midland
Midland’s position is that it was not a fiduciary and had no
obligation to advise anyone or investigate anything (Doc. 91 at 2).
Midland also cites K.S.A. 58-658 for the proposition that it was
entitled to rely on the first power of attorney and had no duty to
investigate the authenticity of the power of attorney, the validity
of Johnson-Marin’s designation, her qualifications, the propriety of
her appointment or whether she was acting pursuant to her instructions
(id. at 6-7).
Ramirez
Ramirez’s position is that Johnson-Marin had a limited power of
attorney which allowed her to purchase annuities for the benefit of
children but did not allow her to sell the annuities to Henderson.
He cites Farmers Grain and Supply Co. v. The Atchison, Topeka & Santa
Fe Railway Co., 121 Kan. 10, 11, 245 P. 738 (1926) and Estate of
Draper v. Bank of America, et al., 288 Kan. 510, 518-19, 205 P.3d 698
(2009) which observed, in the context of a constructive trust:
Where, as here, a person who holds property that is
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subject to a beneficial interest transfers the property, an
action may be brought against the third party for the
return of the property. The Restatement explains:
“(1) Where a person holding property in which another
has a beneficial interest transfers title to the property
in violation of his duty to the other, the transferee holds
the property subject to the interest of the other, unless
he is a bona fide purchaser.
“(2) Where the owner of property transfers it in fraud
of third persons, the transferee holds the property subject
to their claims, unless he is a bona fide purchaser.”
Restatement of Restitution § 168.4
Finally, Ramirez argues that Henderson is a merchant-buyer which
must meet a high standard of good faith, citing Hammer v. Thompson,
35 Kan. App. 2d 165, 129 P.3d 609, review denied 281 Kan. 1377 (2006).
Ramirez identifies a number of things Henderson failed to do before
it purchased the annuities which he variously asserts demonstrate
“failure to act with honesty in fact,” failure to “meet any reasonable
commercial standards of fair dealing in the trade,” and failure to
investigate, among other things (PTO, Doc. 71).
Henderson
Henderson’s position is that Johnson-Marin had both actual and
apparent authority under a general power of attorney as defined in
K.S.A. 58-654 to sell the annuities, that it is a good-faith purchaser
and thus is entitled to the annuities’ proceeds.

Henderson also

asserts that Midland failed to properly set up the annuities (Docs.
82 at 9-10 and 92 at 7-9).
The bottom line of Henderson’s position is that Johnson-Marin
represented herself on documents provided by Henderson as the “owner”
and “annuitant” of the annuities who had the absolute right to sell

4

Now Restatement Third, Restitution and Unjust Enrichment, §
58(2).
-15-

them and that Henderson relied in good faith on her representations.
Analysis of the Parties’ Positions
It should be immediately apparent that each parties’ position is
problematic, at least in part.

Midland cannot credibly contend that

it “relied” on Johnson-Marin’s power of attorney prior to issuing the
annuities.

Although K.S.A. 58-658 exempts from liability third

persons who act in reliance on a power of attorney, the statute still
requires the “third person” to act in “good faith.” Midland evidently
considers itself a “third person” under the statute.

Here, the

evidence is uncontroverted that Midland never had the power of
attorney translated into English and therefore had no way to know that
the document was, in fact, a power of attorney, much less what it
authorized Johnson-Marin to do, or not do.

Nor can Midland claim

reliance on Milner, who apparently was relying on Midland to have the
document translated.

The court is not impressed with Midland’s glib

footnote that when the power of attorney finally was translated, long
after the fact, it granted Johnson-Marin the “power to conduct these
transactions” (id. at 4, n.2), whatever Midland considers “these
transactions” to be at this point.
The belatedly translated power of attorney gave Johnson-Marin
authority to “. . . take all legal steps and formalities related to
the death . . .” of Martinez.

Assuming this gave Johnson-Marin

authority to purchase the annuities, Midland knew well before the
issue date of July 21, 2006 that the annuities were for the benefit
of the children.

Under no stretch of construction did the power of

attorney authorize Johnson-Marin to use the annuity payments herself,
much less sell the annuities and pocket the money.
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Yet, by making

Johnson-Marin the “owner,” that is exactly what Midland did, at least
as far as Henderson is concerned.
Nor is the court persuaded by Midland’s apparent “fall-back”
argument,

based

solely

on

Ronald’s

testimony,

that

Midland

was

obligated to issue the annuities exactly in accordance with the
applications submitted by Milner.

The weight and credibility of this

evidence is diminished by Midland’s failure to translate the power of
attorney, by Midland’s knowledge of the purpose of the annuities and
by Midland’s failure to provide the original annuities to Henderson
as authorized by Johnson-Marin.

It seems reasonable to infer that

Henderson’s decision to purchase the annuities would have been much
different had it been aware that the children, not Johnson-Marin, were
the named annuitants. Overall, the court finds Ronald’s explanations
too “convenient” to be entirely credible.
The court also questions the applicability of Midland’s cited
case authority. Midland’s cases speak to the first party relationship
between insurance companies and their insureds in the context of
claims by the insureds that their insurance companies failed to act
in good faith in various ways.

None of the cases, which involve

homeowner and auto insurance policies, have facts remotely similar to
this case.

Furthermore, annuities are not considered life insurance

policies, even when issued by an insurance company.

In re Vinzant,

108 B.R. 752, 756 (Bankr. D. Kan. 1989).
Ramirez’s reliance on Hammer v. Thompson is problematic because
for the case to apply, even tangentially, Henderson must be a

“merchant” under Article 2 of the UCC, K.S.A. 84-2-104(a).
Ramirez cites no authority that an annuity contract is a “good”
-17-

as defined in § 84-2-105.

It may, or may not, be that Henderson

“holds [itself] out as having knowledge or skill peculiar to the
practices . . . involved in the transaction . . .” but there is
no evidence in the record regarding what those practices are,
what “reasonable commercial standards” Henderson failed to meet
or anything else which establishes some baseline of industry
practice.

In other words, applying Hammer v. Thompson’s teachings,

the record is inadequate to find either that Henderson is a “merchant”
or what reasonable commercial standards of fair dealings apply to its
business.5
Some of Henderson’s positions are especially questionable.

At

the outset, the court rejects Henderson’s statement that Johnson-Marin
was acting pursuant to a general power of attorney (Doc. 82 at 8).
Clearly it was a limited power.
is beside the point.

But the document’s characterization

K.S.A. 58-656 requires every attorney-in-fact

to carry out her fiduciary obligations in the best interests of the
principal and to “avoid self-dealing and conflicts of interest.”

No

legitimate argument can be made that the power of attorney gave
Johnson-Marin the authority to convert the annuity payments to her own
use or sell the annuities to Henderson. Presumably Johnson-Marin will
be held criminally responsible for her actions.
The court also rejects Henderson’s arguments about reliance on
the provisions of the annuity contracts, i.e., that they could be
assigned, that ownership could be changed, etc. (Doc. 92 at 9-10).
5

In his post-trial submission, Ramirez claims that the annuity
Purchase Agreements are based on fraud (Doc. 19 at 5-6). No such
claim is made in the Pretrial Order and Ramirez has not moved to amend
the PTO.
-18-

The contracts did allow for this (see FOF ¶ 11, supra) but Henderson
never saw the annuity contracts until long after this case was filed.
Henderson cannot claim reliance on unseen provisions of the annuity
contracts to justify its initial decision to purchase them any more
than Midland can rely on the power of attorney given to Johnson-Marin
which it did not have translated.

The court will address this more

thoroughly in its discussion of Henderson’s “good faith” argument,
infra.
Finally, the court rejects as unsupported, and frankly bizarre,
Henderson’s argument that Ms. Hernandez and Ramirez are “without clean
hands in protecting the interests” of the children and that Ms.
Hernandez was “in agreement with the subterfuge created by Midland’s
issuance of the annuity contracts to Johnson-Marin as owner and
beneficiary rather than referencing the three minor children as the
beneficial owners of the annuity contracts that could trigger income
tax ramifications” (Doc. 92 at 16-17).

The only evidence about Ms.

Martinez and the children is that they are not U.S. citizens who
reside in Mexico. There is absolutely no evidence of any “subterfuge”
involving Ms. Martinez and Midland.

Neither Ramirez nor Henderson

make affirmative claims against Midland so, with the exception of the
attorney’s fees issue, infra, there is no point in further review of
Midland’s actions.
After carefully considering the parties’ positions, the court
believes the case turns on the issue as framed by Henderson itself:
whether Henderson was a bona fide purchaser for value; in other words,
that it was an innocent purchaser acting in good faith (Doc. 92 at 4).
Discussion of Henderson’s Good Faith
-19-

It

has

long

been

affirmative defense.

the

law

that

bona

fide

purchase

is

an

Independent Coal & Coke Co. v. United States,

274 U.S. 640, 650 (1927); United States v. Bennett, 296 F. 409, 413
(8th Cir. 1923) (appeal from the District of Kansas before the
establishment of the 10th Circuit).

Albeit under a different set of

facts, the Kansas Court of Appeals has observed that “. . . at least
some modicum of investigation was required of a bonafide purchaser
under these circumstances.” Larson Operating Co. v. Petroleum, Inc.,
32 Kan. App. 2d 460, 469, 84 P.3d 626 (2004).
Henderson’s good faith argument is premised upon Johnson-Marin’s
representations that she was the owner, annuitant and payee of the
annuities. These representations were made on documents generated by
Henderson and given by Henderson to Johnson-Marin for signature.
Johnson-Marin

signed the documents, of course; if she hadn’t, she

wouldn’t have been paid.

The only documents apparently provided by

Johnson-Marin herself were the specification pages which did not
reflect the children as annuitants.
Henderson says it was “duped” (Doc. 92 at 14) but the court is
not persuaded because the evidence shows that Henderson did not follow
its representations in its own Purchase Agreements.

As noted in

paragraph 26, supra, each Agreement states: “You [Johnson-Marin] have
supplied us [Henderson] with a copy of the Annuity.”

Similarly, the

Agreements represent: “We [Henderson] have obtained the written
acknowledgment of the Annuity Company [Midland] of the proposed sale
and such Annuity Company has acknowledged on its books and records
that We . . . is the owner . .. of the Annuity . . .”

Neither of

these events had occurred as of the date the Purchase Agreements were
-20-

signed, January 16, 2008.
The language of the Purchase Agreements, along with Henderson’s
requirement that

Johnson-Marin sign authorizations allowing it to

obtain the annuities themselves, clearly demonstrates Henderson’s
recognition that it needed independent validation of Johnson-Marin’s
right to sell the annuities.

Henderson’s completely unexplained

failure to follow through on its own requirements is significant to
its “good faith” argument.

Capriotti’s testimony that Henderson

commonly purchases annuities without first obtaining the documents
themselves, while not directly challenged, seems inconsistent, if not
actually reckless, with the practice of a company which is in the
business of purchasing annuities and structured settlements.
that

as

it

may,

had

Henderson

followed

through

with

But be

its

own

requirements and using the authorization provided by Johnson-Marin,
it would have learned that, contrary to her representations, JohnsonMarin was not the “annuitant” and “payee” of the annuities. Henderson
would have discovered, based on the specification pages appended to
the Midland annuities, that the children were the annuitants and
therefore entitled to the periodic payments.
When Henderson did learn of the existence of the children as
annuitants less than one month after the sale documents were signed,
it did no follow up, as Capriotti acknowledged. Henderson has offered
no explanation for these failures and no reasonable inference of its
“good faith” purchase arises solely because Johnson-Marin signed
documents prepared by Henderson.

In short, Henderson really wasn’t

“duped” by Johnson-Marin; rather, it was the victim of a selfinflicted wound because it did not do the investigation and due
-21-

diligence established by its own requirements.
Accordingly, the court concludes, as a matter of law, that
Henderson failed to prove that it is a good faith purchaser of the
annuities.
Attorney’s Fees
Midland requests attorney’s fees and cites Transamerica Premier
Ins. Co. v. Growney, No. 94-3396, 1995 WL 675368 (10th Cir. Nov. 13,
1995) and American Home Life Ins. Co. v. Barber, No. 02-4168-SAC, 2003
WL 21289986 (D. Kan. May 16, 2003) in support.

“[F]ees are normally

awarded to an interpleader plaintiff who ‘(1) is ‘disinterested’ (
i.e., does not itself claim entitlement to any of the interpleader
fund); (2) concedes its liability in full; (3) deposits the disputed
fund in court; and (4) seeks discharge,’ and ‘who is [not] in some way
culpable

as

regards

the

subject

matter

of

the

interpleader

proceeding.’” Growney, 1995 WL 675368 at *1.
Both Ramirez and Henderson object to Midland’s request for
attorney fees claiming that it is culpable in the sale of the
annuities from Johnson-Marin to Henderson.

The court agrees, for the

reasons already stated.
Accordingly, Midland’s request for attorney’s fees is denied.
Ramirez cites no case law in support of his request for attorney’s and
it is also denied.
Additional Briefing
In the usual interpleader, the court would declare that Ramirez
is entitled to manage the annuities pursuant to the second power of
attorney.

But the court is not satisfied that such a declaration

would be in the best interests of the children, the minor annuitants.
-22-

Rather than make a unilateral declaration on an issue not briefed by
counsel, the parties are directed to confer and, if possible, agree
on a solution which will ensure that the children will get full
benefit of the remainder of the annuities.

If no solution can be

reached, the court will consider such proposals as the parties may
wish to offer. The submissions must be filed on or before January 31,
2012.
A motion for reconsideration of this order pursuant to this
court's Rule 7.3 is not encouraged.

The standards governing motions

to reconsider are well established.

A motion to reconsider is

appropriate where the court has obviously misapprehended a party's
position or the facts or applicable law, or where the party produces
new evidence that could not have been obtained through the exercise
of reasonable diligence.

Revisiting the issues already addressed is

not the purpose of a motion to reconsider and advancing new arguments
or supporting facts which were otherwise available for presentation
when the original motion was briefed or argued is inappropriate.
Comeau v. Rupp, 810 F. Supp. 1172 (D. Kan. 1992).

Any such motion

shall not exceed five pages and shall strictly comply with the
standards enunciated by this court in Comeau v. Rupp.

The response

to any motion for reconsideration shall not exceed five pages.
reply shall be filed.
IT IS SO ORDERED.
Dated this

9th

day of January 2012, at Wichita, Kansas.

s/Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE
-23-

No