Maldonado-Vinas et al v. National Western Life Insurance Co.
Filing
80
OPINION AND ORDER - Denied 73 MOTION for Summary Judgment filed by National Western Life Insurance Co.; granting 74 MOTION for Summary Judgment filed by Juan Carlos Iglesias-Maldonado, Jose Carlos Iglesias-Maldonado, Damaris Maldonado-Vinas. Judgment to be entered accordingly. Signed by US Magistrate Judge Camille L. Velez-Rive on 3/31/16.(ljt)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
DAMARIS MALDONADO VIÑAS, et al.,
Plaintiffs,
CIVIL NO. 14-1192 (CVR)
v.
NATIONAL WESTERN LIFE INSURANCE
COMPANY,
Defendant.
OPINION AND ORDER
INTRODUCTION
In April and May 2011, Carlos Iglesias-Alvarez (“Mr. Iglesias”) purchased two
annuities from Defendant National Western Life Insurance Company (“NW”).
The
beneficiary of both annuities was his brother, Francisco Iglesias-Alvarez, a resident and
citizen of Spain (“Francisco Iglesias, the Spanish national”). Mr. Iglesias purchased the
annuities using $2,935,000.00 of conjugal partnership funds without his wife’s consent.
Later that same year, on November 2, 2011, Mr. Iglesias died and his brother, the
beneficiary, collected approximately $3,000,000.00 dollars from both annuities
unbeknownst to Mr. Iglesias’ widow, Plaintiff Damaris Maldonado Viñas, or their sons
José Carlos Iglesias Maldonado and Juan Carlos Iglesias Maldonado (“collectively,
Plaintiffs”). Plaintiffs now sue to collect what they believe is rightfully theirs.
The parties agreed that summary disposition of the claims herein presented was
viable, and were ordered to file simultaneous motions for summary judgment. Both
parties so complied. (Docket Nos. 73 and 74). Their arguments boil down as follows.
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Plaintiffs argue that:
1. Annuity no. 2 is void because it was never perfected. The first application lacked
a signature and was issued by an agent with a suspended license and a
terminated contract.
The second application lacked the signatures of the
annuitant and the owner, and ratification is unavailable to Defendant.
2. Annuity no. 1 is null because it was obtained by an unlicensed agent.
3. Lack of spousal consent in the use of conjugal funds to purchase the annuities
voids both annuities and they do not fall under any exception available under
the Civil Code.
Defendant argues that:
1. Plaintiffs lack any factual basis to dispute the owner’s consent evidenced by a
signature in the application for Annuity no. 2, nor can they dispute the legal
standard that allows for the ratification of such annuity.
2. The participation of an unlicensed agent does not entail the nullity of a policy,
and therefore the licensing status of the different individuals who appeared as
agent on Annuity no. 1 is irrelevant to their validity and effectiveness.
3. Spousal consent is unnecessary for the purchase and subsequent validity of the
annuity policies.
4. Assuming any of Plaintiffs’ causes of annulment were to succeed, Plaintiffs
must restore the amounts received as insurance benefits under the annuities to
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NW if they ask NW to return them the premiums paid by the deceased, Mr.
Iglesias.
NW also posits, for the third time, that the recipient of the funds in question and
beneficiary to the annuities, Francisco Iglesias, the Spanish national, is an indispensable
party to this case as he is a direct party to the contract, and thus, relief without him is
incomplete.
STANDARD
Summary judgment is appropriate when “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 that the moving party is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56 (c). Pursuant to the language of the rule,
the moving party bears the two-fold burden of showing that there is “no genuine issue as
to any material facts,” and that he is “entitled to judgment as a matter of law.” VegaRodríguez v. Puerto Rico Tel. Co., 110 F.3d 174, 178 (1st Cir. 1997).
After the moving party has satisfied this burden, the onus shifts to the resisting
party to show that there still exists “a trial worthy issue as to some material fact.” CortésIrizarry v. Corporación Insular, 111 F.3d 184, 187 (1st Cir. 1997).
A fact is deemed
“material” if it potentially could affect the outcome of the suit. Id. Moreover, there will
only be a “genuine” or “trial worthy” issue as to such a “material fact,” “if a reasonable
fact-finder, examining the evidence and drawing all reasonable inferences helpful to the
party resisting summary judgment, could resolve the dispute in that party’s favor.” Id.
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At all times during the consideration of a motion for summary judgment, the Court must
examine the entire record “in the light most flattering to the non-movant and indulge all
reasonable inferences in the party’s favor.” Maldonado-Denis v. Castillo-Rodríguez, 23
F.3d 576, 581 (1st Cir. 1994).
The First Circuit Court of Appeals has “emphasized the importance of local rules
similar to Local Rule 56 [of the District of Puerto Rico].” Hernández v. Philip Morris
USA, Inc., 486 F.3d 1, 7 (1st Cir. 2007); see also, Colón v. Infotech Aerospace Servs., Inc.,
869 F.Supp.2d 220, 225-226 (D.P.R. 2012). Rules such as Local Rule 56 “are designed
to function as a means of ‘focusing a district court's attention on what is -and what is notgenuinely controverted.’ ” Calvi v. Knox County, 470 F.3d 422, 427 (1st Cir. 2006)).
Local Rule 56 imposes guidelines for both the movant and the party opposing summary
judgment. A party moving for summary judgment must submit factual assertions in “a
separate, short, and concise statement of material facts, set forth in numbered
paragraphs.” Loc. Rule 56(b). A party opposing a motion for summary judgment must
“admit, deny, or qualify the facts supporting the motion for summary judgment by
reference to each numbered paragraph of the moving party’s statement of facts.” Loc. Rule
56 (c).
If they so wish, they may submit a separate statement of facts which they believe
are in controversy.
Facts which are properly supported “shall be deemed admitted
unless properly controverted.” Loc. Rule 56(e); P.R. Am. Ins. Co. v. Rivera-Vázquez, 603
F.3d 125, 130 (1st Cir. 2010) and Colón, 869 F.Supp.2d at 226. Due to the importance of
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this function to the summary judgment process, “litigants ignore [those rules] at their
peril.” Hernández, 486 F.3d at 7.
FINDINGS OF FACT
The parties submitted a Joint Statement of Uncontested Facts (Docket No. 69)
which is applicable to both motions for summary judgment. Based on that document,
the Court finds the uncontested facts in this case to be as follows:
I. Family Background
1. Carlos Iglesias-Alvarez was born in Madrid, Spain, on August 11, 1948 and he
died in Bayamón, Puerto Rico on November 2, 2011.
2. At the time of his death, Carlos Iglesias-Alvarez was a citizen of Spain and of the
United States of America.
3. Francisco Iglesias-Alvarez, who is a citizen and resident of Spain, is Carlos
Iglesias-Alvarez’ brother.
4. On February 11, 1989, plaintiff Damaris Maldonado Viñas married Carlos
Iglesias-Alvarez. Complaint, Docket No. 1, ¶ 5; Answer to Complaint, Docket No. 26, ¶ 5;
NW Docket No. 42-1, ¶1 and P’s response at Docket No. 44-1.
5. Plaintiff Damaris Maldonado Viñas remained married to Carlos Iglesias-Alvarez
for twenty-two years until his death on November 2, 2011. Complaint, ¶ 6; Answer to
Complaint, Docket No. 26, ¶ 6; NW Docket No. 42-1, ¶2 and P’s response at Docket No.
44-1; P’s Statement of Fact, ¶1, Docket No. 44-1 and NW’s response at Docket No. 52-1.
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6. Plaintiffs Juan Carlos Iglesias Maldonado and José Carlos Iglesias Maldonado
are the two sons of Damaris Maldonado Viñas and Carlos Iglesias-Alvarez. Complaint,
¶7, Docket No. 1, and corresponding answer at Docket No. 26.
7. Carlos Iglesias-Alvarez died on November 2, 2011. Complaint, ¶ 15; Answer to
Complaint, Docket No. 26, ¶ 15; NW Docket No. 42-1, ¶7 and P’s response at Docket No.
44-1.
8. Plaintiffs Juan Carlos Iglesias Maldonado, José Carlos Iglesias Maldonado and
Damaris Maldonado Viñas, as his widow, have been declared the legal heirs of Carlos
Iglesias-Alvarez in Puerto Rico and are all residents of San Juan, Puerto Rico. Complaint,
¶3, Docket No. 1, and corresponding answer at Docket No. 26.
9. At the time of his death, Carlos Iglesias-Alvarez and his wife Damaris Maldonado
Viñas had approximately $47,000.00 in Puerto Rican bank accounts.
Additionally,
Carlos Iglesias-Alvarez and his wife Damaris Maldonado Viñas had real property valued
at approximately $344,000. NW’s Additional Facts, ¶28, at Docket No. 52-1 and P’s
response thereto at Docket No. 55-1.
10. At the time of his death, Carlos Iglesias-Alvarez had approximately
$5,900,000.00 in Spanish bank accounts. NW’s Additional Facts, ¶29, at Docket No.
52-1 and P’s response thereto at Docket No. 55-1. The parties to an inheritance partition
document executed in Spain (between Carlos Iglesias-Alvarez’s mother, brother, widow
and sons), which did not include National Western, acknowledged that the money in
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those Spanish bank accounts belonged to the conjugal partnership constituted between
Carlos Iglesias-Alvarez and Damaris Maldonado Viñas.
11. After Carlos Iglesias-Alvarez’s death, National Western deposited the amount
of $2,661,170.65 in an interpleader proceeding before the Commonwealth of Puerto Rico
Court of First Instance, which corresponded to the insurance benefits of three additional
annuities subscribed by the deceased, which are not at issue in this case. One of the
annuities named Damaris Maldonado Viñas as beneficiary, a second one named Joel de
Jesús as the beneficiary, and the third did not identify a beneficiary but Joel de Jesús
claimed he had been designated as its beneficiary. Of the funds deposited in Court,
Plaintiffs received $1,206,093.01 pursuant to Annuity no. 0101240500. Through
settlement with Joel de Jesús, the other co-defendant and claimant against the funds of
the other two Annuity policies, Plaintiffs received the amounts of $1,278,300 out of the
$1,568,000 in benefits allocated to Annuity no. 0101279900 and $176,777.64 out of the
$192,777.64 allocated to Annuity no. 0101282428. The balance of the insurance benefits
of $305,700.00 was paid out to Mr. De Jesús. National Western was not a party to this
settlement document. NW’s Additional Facts, ¶30, at Docket No. 52-1 and P’s response
thereto at Docket No. 55-1.
II. National Western’s Procedures
Regarding the Same Annuity Policies
12. Defendant National Western is an insurance company chartered in the State of
Colorado with principal offices in Austin, Texas and licensed in 49 states, the District of
Columbia, and several U.S. territories, including Puerto Rico. Complaint, ¶4, Docket No.
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1, and corresponding answer at Docket No. 26; NW’s Additional Facts, ¶1, at Docket No.
52-1 and P’s response thereto at Docket No. 55-1.
13. National Western provides insurance products on a global basis to meet the life
insurance needs of well-defined market segments, including Puerto Rico.
NW’s
Additional Facts, ¶2, at Docket No. 52-1 and P’s response thereto at Docket No. 55-1
14. Section F-4 of National Western’s Agent Procedure Manual says in part:
Completion of the application and any additional required forms in full is
an important step in avoiding processing delays. The application is part of a legal
contract and approved by the various state insurance departments. Prior to
submission, review the documents thoroughly for completeness and verify that no
information has been omitted. Pay close attention to the following:…. The
application has all necessary signatures… Signature of owner if other than insured.
Exhibit F to Docket No. 44 (Agent Procedure Manual, produced by National
Western); P’s Statement of Fact, ¶14, Docket No. 44-1 and NW’s response at Docket No.
52-1.
15. The signatures of the Owner and the Annuitant are obtained on the day the
annuity application is filled out; for the policy’s efficacy the beneficiary’s signature is not
needed. The Owner of the policy is the equivalent of the buyer of the same, even if he did
not pay for the policy. The Owner is the one to whom the insurer pays or returns the
principal, plus interest or profits. The Beneficiary is the one who will receive the payments
at the time of the Annuitant’s death. Here, the owner and beneficiary were the same
person. Exhibit I to Docket No. 44, p.8 (National Western Answer to Interrogatory No.
4 in Civil Case No. K AC2012-0300); P’s Statement of Fact, ¶1, Docket No. 44-1 and NW’s
response at Docket No. 52-1.
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16. Once the application form is completed by the authorized agent and received
in National Western’s offices in Austin, it is assigned a policy number, which is
handwritten by National Western personnel on the pertinent application form.
17. Since at least December 2001, National Western has not kept the originals of
any insurance or annuity contracts it issues, as most of its records are kept as electronic
documents. NW’s Additional Facts, ¶3, at Docket No. 52-1 and P’s response thereto at
Docket No. 55-1.
18. Rather than having a full electronic copy of each contract issued, it is National
Western’s practice to recreate a contract by printing out the various forms that, as a whole,
constitute an entire policy and attaching them to the application, which together form the
particular contract needed.
NW’s Additional Facts, ¶4, at Docket No. 52-1 and P’s
response thereto at Docket No. 55-1.
III. The Annuities at Issue in This Case
19. On April 30, 2011, Carlos Iglesias signed a National Western Life Insurance
Company application which would eventually entail the issuance of Annuity no.
0101270833 (Annuity no. 1). Exhibit A to Docket No. 44; Complaint ¶8, admitted in
Answer to Complaint; P’s Statement of Fact, ¶2, Docket No. 44-1 and NW’s response at
Docket No. 52-1. Acknowledging that its legal implications are an issue in the case, it is
stipulated that Damaris Maldonado Viñas did not provide written consent for this act.
20. On the application which was issued as Annuity no. 0101270833 (Annuity no.
1), Carlos Iglesias named his brother Francisco J. Iglesias-Alvarez as the annuity’s
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beneficiary.
Exhibit A to Docket No. 44; Complaint ¶ 9, admitted in Answer to
Complaint; P’s Statement of Fact, ¶3, Docket No. 44-1 and NW’s response at Docket No.
52-1.
21. On May 2, 2011, Carlos Iglesias executed another application for another
annuity with National Western Life Insurance Company (original Annuity no. 2).
Complaint, ¶ 12; Answer to Complaint, Docket No. 26, ¶ 12; see, also, Docket No. 11-3, p.
1 and p. 35; NW Docket No. 42-1, ¶3 and P’s response at Docket No. 44-1; P’s Statement
of Fact, ¶10, Docket No. 44-1 and NW’s response at Docket No. 52-1. Acknowledging
that its legal implications are an issue in the case, it is stipulated that Damaris Maldonado
Viñas did not provide written consent for this act.
22. The May 2, 2011 application identified “Francisco J. Iglesias Alvarez” (Carlos
Iglesias-Alvarez’s brother) as beneficiary of original Annuity no. 2, and Carlos J. Iglesias
as the annuitant. Complaint, ¶ 13; Answer to Complaint, Docket No. 26, ¶ 13; Docket No.
11-3, p 35; NW Docket No. 42-1, ¶5 and P’s response at Docket No. 44-1.
23. The May 2, 2011 application identified “Francisco J. Iglesias”, with Social
Security number 127 44 4919 and address at Ave. Magnolia P-9 Magnolia Gardens,
Bayamón, P.R, as the “owner” of the annuity. Exhibit E to Docket No. 44; P’s response
to NW’s ¶5 at Docket No. 44-1; P’s Statement of Fact, ¶11, Docket No. 44-1 and NW’s
response at Docket No. 52-1.
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24. As a citizen and resident of Spain, Francisco J. Iglesias-Alvarez does not have
a social security number and his Spanish N.I.D./N.I.F. number is 000 65 1420. Docket
No. 44-11, at p. 2.
25. The Ave. Magnolia P-9, Magnolia Gardens, Bayamón, P.R address at the time
the annuity was issued was the location of Carlos Iglesias’ business operation, where no
one resided.
26. Both annuity applications were received at National Western on May 4, 2011.
NW’s Additional Facts, ¶¶5-6, at Docket No. 52-1 and P’s response thereto at Docket No.
55-1
27. The application form dated April 30, 2011 was assigned Annuity no.
0101270833 (Annuity No. 1), and the application form dated May 2, 2011 was originally
assigned Annuity policy number 0101270834 (original Annuity no. 2). NW’s Additional
Facts, ¶6, at Docket No. 52-1 and P’s response thereto at Docket No. 55-1.
28. Carlos Iglesias-Alvarez submitted $1,467,500 to National Western to pay for
Annuity no. 0101270833 (Annuity no. 1) and $1,467,500 to pay for Annuity no.
0101270834 (original Annuity no. 2).
Complaint ¶¶ 8&12, admitted in Answer to
Complaint; P’s Statement of Fact, ¶17, Docket No. 44-1 and NW’s response at Docket No.
52-1; NW’s Additional Facts, ¶7, at Docket No. 52-1 and P’s response thereto at Docket
No. 55-1.
29. National Western received Cashier’s Check number 1555 697 000 001982,
dated April 26, 2011, drawn from Banco Santander’s International Madrid, Spain office,
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for the total amount of $2,935,000, with instructions from Carlos Iglesias to split the
funds between the two annuities. Exhibit G to Docket No. 44 (Document produced by
National Western.); P’s Statement of Fact, ¶¶18-19, Docket No. 44-1 and NW’s response
at Docket No. 52-1; NW’s Additional Facts, ¶7, at Docket No. 52-1 and P’s response thereto
at Docket No. 55-1 .
30. The funds used for the issuance of Cashier’s Check number 1555 697 000
001982, dated April 26, 2011, and the eventual payment of the two annuities at issue here,
are presumed to belong to the conjugal partnership of Carlos Iglesias-Alvarez and Plaintiff
Damaris Maldonado Viñas.
National Western has no evidence to rebut such legal
presumption.
IV. The Insurance “Agent” for Annuity no. 1270833 (Annuity no. 1)
31. Regarding Annuity no. 0101270833, the person representing herself as
National Western’s agent was Marangelis Rivera. Exhibit A to Docket No. 44; Complaint
¶ 10, admitted in Answer to Complaint; P’s Statement of Fact, ¶4, Docket No. 44-1 and
NW’s response at Docket No. 52-1.
32. Marangelis Rivera did not have an agent’s license from the Office of the
Commissioner of Insurance of the Commonwealth of Puerto Rico. She has never had a
file at the Office of the Commissioner of Insurance. Exhibit B to Docket No. 44 (Negative
certification from Commissioner of Insurance); P’s Statement of Fact, ¶5, Docket No. 441 and NW’s response at Docket No. 52-1.
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33. The insurance agent license provided by Marangelis Rivera to National
Western, and kept in the Company’s file, was falsified and lacked the Insurance
Commissioner’s signature. P’s Statement of Fact, ¶¶7-8, Docket No. 44-1 and NW’s
response at Docket No. 52-1.
34. National Western had informed the Office of the Insurance Commissioner on
two different dates (January 31, 2011 and December 31, 2011) of its appointment of
Marangelis Rivera as an authorized agent.
Docket No. 52-2. Although pertinent
personnel verifies if the listed individuals actually have an active agent license registered
at their office at the time such notice is received in order to file a copy of the notice in their
file, the Office of the Insurance Commissioner does not contact the insurance company
that made the appointment if it identifies an individual that does not possess a valid
license at the time of the appointment, as it is possible that such a license may be
requested later. Docket No. 44-13, Orozco Deposition, pp. 24-29.
35. For approximately eight years prior to January 23, 2012, when the Office of the
Insurance Commissioner implemented a new licensing system known as SBS, the name
of all licensed agents in Puerto Rico was listed in the office’s website and available to the
public, albeit in different locations of the website. Email supplementing deposition
testimony of April 13, 2015 4:30:11 PM; Docket No. 44-13, Orozco Deposition, pp. 20.
36. The standard contract form executed by National Western and Marangelis
Rivera as a National Western agent in Puerto Rico sets forth as follows:
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3. APPOINTMENT. We [National Western] appoint you personally… to
procure applications for annuity contracts as are issued by us subject to our
Ratebook and our Rules and Regulations. You … agree to abide by our Rules and
Regulations now or hereinafter in force, which Rules and Regulations shall
constitute a part of this contract.
….
6. AUTHORITY. Your [i.e. Ms. Rivera’s] right, power, or authority on our
behalf shall exist only as expressly stated in this contract. No right, power, or
authority shall be implied either from the grant or denial of powers specifically
mentioned herein or the failure to mention any right or power herein.
You agree that you… are without authority to do or perform and expressly
agree not to do or perform the following acts on our behalf: (a) incur any
indebtedness or liability; (b) make, alter, or discharge contracts: (c) waive
forfeitures; (d) quote rates other than as quoted by us; (e) extend the time for
payment of any premium; (f) waive payment in cash; (g) guarantee dividends; (h)
deliver any policy more than thirty (30) days after issuance by us; or (i) deliver any
policy unless the applicant is in the health described in the application and in good
health.
Further, you agree that you… shall not: (j) violate the insurance laws of any
state in which you may be soliciting applications for annuities; (k) withhold any of
our, the policyholder's, prospective policyholder's, or applicant's monies or
property; (l) rebate or offer to rebate all or any part of a premium on our annuities;
(m) induce or attempt to induce any of our policyholders to discontinue payment
of premiums or to relinquish any annuity; (n) induce or attempt to induce any of
our agents or brokers to leave our service; (o) perpetrate any fraud against us, our
policyholders, prospective policyholders, or applicants; or (p) violate our Rules
and Regulations which are incorporated herein. …
Exhibit A, ¶¶3 and 6.
V. The Insurance Agent for Annuity no. 0101270834 (original Annuity no. 2)
and its Replacement, Annuity no. 0101271540
37. The person that originally signed as agent in the application form dated May 2,
2011 which was assigned Annuity no. 0101270834 was Carlos A. García. Exhibit E to
Docket No. 44, p. 2; P’s Statement of Fact, ¶15, Docket No. 44-1 and NW’s response at
Docket No. 52-1; NW’s Additional Facts, ¶8, at Docket No. 52-1 and P’s response thereto
at Docket No. 55-1.
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38. The Office of the Insurance Commissioner had suspended Carlos A. García’s
license on September 13, 2010, but that suspension was still the subject of a judicial
appeal. (Judicial notice: Comisionado de Seguros de Puerto Rico v. Carlos Alberto García
and Joel de Jesús, 2011 WL 5190937 (TCA)); P’s Statement of Fact, ¶16, Docket No. 44-1
and NW’s response at Docket No. 52-1.
39. Moreover, prior to May 4, 2011 (when the applications were received at
National Western), National Western had terminated Carlos García’s agency contract, as
he was facing this disciplinary proceeding before the Puerto Rico Office of the
Commissioner of Insurance that raised questions as to the continued validity of his license
as an agent in that jurisdiction. NW’s Additional Facts, ¶8, at Docket No. 52-1 and P’s
response thereto at Docket No. 55-1.
40. Thus, by May 9, 2011, National Western had prepared a check to reimburse
Carlos Iglesias the funds received for the issuance of Policy 0101270834. This check
would eventually be voided to complete the process of issuing Annuity no. 0101270834.
NW’s Additional Facts, ¶9, at Docket No. 52-1 and P’s response thereto at Docket No. 551.
41. On May 9, 2011, National Western’s personnel, Lilly Michel-Sudderth, wrote
an e-mail to National Western’s then Assistant Vice President in the Domestic Marketing
Department, Lura Rogers, regarding Policy 0101270834, indicating that: “The 1.4 million
dollar case we cancelled out is on Carlos Iglesias-Alvarez #0101270834. We have the
refund check ready to be mailed out.
Please let me know if we will or will not be
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reinstating the agent. Mr. James Rankin called earlier today to tell us that the agent was
going to be reinstated.” NW’s Additional Facts, ¶10, at Docket No. 52-1 and P’s response
thereto at Docket No. 55-1.
42. On that same date, Ms. Rogers responded that “The agent will not be reinstated
but Néstor Torres may rewrite the case.” NW’s Additional Facts, ¶11, at Docket No. 52-1
and P’s response thereto at Docket No. 55-1.
43. Néstor Torres was at the time, and continues to be, an independent contractor
designated as National Western’s general agent under the Moody Insurance Group. NW’s
Additional Facts, ¶13, at Docket No. 52-1 and P’s response thereto at Docket No. 55-1.
44. The ASSOCIATE REGIONAL GENERAL AGENT agreement between Néstor
Torres and National Western dated August 8, 2000 provides, among other things:
3. APPOINTMENT. We appoint you personally … to procure applications
for insurance and annuity contracts as are issued by us subject to our Rate Book
and our Rules and Regulations. You … agree to abide by our rules and regulations
now or hereinafter in force, which rules and regulations shall constitute a part of
this contract.
....
6. AUTHORITY. Your [Mr. Torres’s] right, power or authority on our
behalf shall exist only as expressly stated in this contract. No right, power or
authority shall be implied either from the grant or denial of powers specifically
mentioned herein or the failure to mention any right or power herein.
You agree that you and your agents are without authority to do or perform
and expressly agree not to do or perform the following acts on our behalf: (a) incur
any indebtedness or liability; (b) make, alter or discharge contracts; (c) waive
forfeitures; (d) quote rates other than as quoted by us; (e) extend the time for
payment of any premium; (f) waive payment in cash; (g) guarantee dividends; (h)
deliver any policy more than thirty (30) days after issuance by us; or (i) deliver any
policy unless the applicant is in the health described in the application and in good
health.
Further, you agree that you and your agents shall not (j) violate the
insurance laws of any state in which you may be soliciting applications for
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insurance; (k) withhold any of our, the policyholder’s, prospective policyholder’s
or applicant’s monies or property; (l) rebate or offer to rebate all or any part of a
premium on our insurance policies or annuities; (m) induce or attempt to induce
any of our policyholders to discontinue payment of premiums or to relinquish any
insurance policy or annuity; (n) induce or attempt to induce any of our agents or
brokers to leave our service; (o) perpetrate any fraud against us, our policyholders,
prospective policyholders or applicants, or (p) violate our Rules and Regulations
which are incorporated herein.
Exhibit B, ¶¶3 and 6.
45. Similarly, the MANAGING GENERAL AGENT CONTRACT dated April 9,
2003 as between Néstor Torres and National Western provided, in part:
3. APPOINTMENT. We appoint you personally … to procure applications
for insurance and annuity contracts as are issued by us subject to our Rate Book
and our Rules and Regulations. You … agree to abide by our rules and regulations
now or hereinafter In force, which rules and regulations shall constitute a part of
this contract.
....
6. AUTHORITY. Your [Mr. Torres’s] right, power or authority on our
behalf shall exist only as expressly stated in this contract. No right, power or
authority shall be implied either from the grant or denial of powers specifically
mentioned herein or the failure to mention any right or power herein.
You agree that you and your agents are without authority to do or perform
and expressly agree not to do or perform the following acts on our behalf: (a) incur
any indebtedness or liability; (b) make, alter or discharge contracts; (c) waive
forfeitures; (d) quote rates other than as quoted by us; (e) extend the time for
payment of any premium; (f) waive payment in cash; (g) guarantee dividends; (h)
deliver any policy more than thirty (30) days after issuance by us; or (i) deliver any
policy unless the applicant is in the health described in the application and in good
health.
Further, you agree that you and your agents shall not (j) violate the
insurance laws of any state in which you may be soliciting applications for
insurance; (k) withhold any of our, the policyholder’s, prospective policyholder’s
or applicant’s monies or property; (l) rebate or offer to rebate all or any part of a
premium on our insurance policies or annuities; (m) induce or attempt to induce
any of our policyholders to discontinue payment of premiums or to relinquish any
insurance policy or annuity; (n) induce or attempt to induce any of our agents or
brokers to leave our service; (o) perpetrate any fraud against us, our policyholders,
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prospective policyholders or applicants, or (p) violate our Rules and Regulations
which are incorporated herein.
Exhibit C, ¶¶3 and 6.
46. Néstor Torres, a fully licensed National Western agent, was contacted to
ascertain whether he would be reissuing the policy application. NW’s Additional Facts,
¶12, at Docket No. 52-1 and P’s response thereto at Docket No. 55-1.
47. By May 12, 2011, Ms. Rogers wrote an email to the Moody Insurance Group, a
national marketing organization contracted with National Western, regarding “IglesiasAlvarez #1270834.” NW’s Additional Facts, ¶13, at Docket No. 52-1 and P’s response
thereto at Docket No. 55-1.
48. The May 12, 2011 email to the Moody Group reads: “Vicki, attached you will
find the application and other required forms that will have to be written and signed by
the applicant Iglesias-Alvarez and Néstor as the writing agent.” NW’s Additional Facts,
¶14, at Docket No. 52-1 and P’s response at Docket No. 55-1.
49. The pertinent paperwork evidencing the issuance of the application by Néstor
Torres was received at National Western by May 12, 2011, and that application was the
basis for the issuance of Annuity policy number 0101271540. Annuity number
0101271540 replaced Annuity no. 0101270834, and thus became Annuity no. 2. NW’s
Additional Facts, ¶15, at Docket No. 52-1 and P’s response thereto at Docket No. 55-1.
50. Nevertheless, the paperwork received from Néstor Torres was incomplete
when it was originally received, as on May 16, 2011 National Western personnel noted in
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the underwriting copy for Annuity policy number 0101271540, that National Western
“need[ed] to know if Francisco is owner – if so… he needs to sign all ppk [paperwork].”
NW’s Additional Facts, ¶16, at Docket No. 52-1 and P’s response thereto at Docket No. 551.
51. By May 27, 2011, however, National Western received the forms with a
signature in the designated area for the signature of the owner, as noted again in the
underwriting notes for Annuity Policy Number 0101271540 which indicate that “Owner’s
sig. rec’d”. NW’s Additional Facts, ¶17, at Docket No. 52-1 and P’s response thereto at
Docket No. 55-1.
52. Néstor Torres was sent a blank application form for him to submit to National
Western for the re-issuance of the annuity policy. P’s additional facts at Docket No. 63
and National Western’s response at Docket No. 65.
53. Néstor Torres did not use the blank form.
Rather, he used a partially
completed form which included the handwritten number “1270834” on it, and which
already had the annuitant’s (Mr. Iglesias’) photocopied signature on it, in order to obtain
the signature of the owner from someone who was introduced to him as Francisco J.
Iglesias. P’s additional facts at Docket No. 63 and National Western’s response at Docket
No. 65.
54. Néstor Torres has no recollection of completing any other section of the
application paperwork used for the issuance of Annuity Policy Number 0101271540 other
than a short visit to annuitant Carlos Iglesias’ office during which he collected the
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signature from someone introduced to him as Francisco J. Iglesias (and from whom he
did not request any identification), and his placing of his own signature in the front page.
55. Soon thereafter, on June 7, 2011, National Western’s Judy Edgar wrote an email
to Néstor Torres, a duly licensed agent then and now, to inform him that “Policy #1271540
for Carlos Iglesias-Alvarez has been reissued under [his] agent account #74813.” NW’s
Additional Facts, ¶18, at Docket No. 52-1 and P’s response thereto at Docket No. 55-1;
Declaration of Karen Johnston, Docket No. 52-3, ¶21 and Exhibit H thereto.
56. Pursuant to National Western’s records, Policy Number 0101270834 was never
issued as a policy since the “agent” that processed it was “un-appointed” at the time the
application paperwork was prepared. NW’s Additional Facts, ¶19, at Docket No. 52-1
and P’s response thereto at Docket No. 55-1.
57. In addition to having the signature of the licensed agent (Néstor Torres) in all
pages except the Annuity Suitability Questionnaire (which does not require it), the
complete set of the paperwork pertaining to the application used to issue Annuity policy
number 0101271540 included “a signature” in the places where the owner identified as
Francisco J. Iglesias was required to sign. NW’s Additional Facts, ¶¶20-21, at Docket No.
52-1 and P’s response thereto at Docket No. 55-1. The Annuity Policy number
“0101271540” was handwritten by National Western in the first page of the application
form documents package, which was the Application Form page signed by Carlos García
and which did not have a signature in the line designated for the owner named as
Francisco J. Iglesias. Docket No. 52-5.
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58. The parties agree that the beneficiary of both policies, Francisco J. IglesiasAlvarez, the Spanish national, did not sign as the owner in the application form for
Annuity no. 2, 0101271540. Complaint, ¶ 14; Answer to Complaint, Docket No. 26, ¶ 14;
see, also, Docket No. 11-3, p. 35; NW Docket No. 42-1, ¶6 and P’s response at Docket No.
44-1.
VI. Francisco J. Iglesias-Alvarez’s Receipt
of the Insurance Benefits for Both Annuities and Related Issues.
59. After Carlos Iglesias-Alvarez’s death, National Western received an Annuity
Claim form and W-9 form, apparently printed from the internet, directly from Francisco
J. Iglesias-Alvarez from his residence in Spain pertaining to Annuity no. 0101271540,
Annuity no. 2. Docket No. 11-1, ¶5.
60. National Western’s Claims Department then responded to Mr. Francisco J.
Iglesias-Alvarez, by letter dated January 7th, 2012 sent to his address in Spain, informing
him he was also the primary beneficiary of Annuity no. 1. In that same letter, National
Western requested that Mr. Francisco J. Iglesias-Alvarez complete an additional claim
form and a W8-Ben form because he was not a U.S. resident. Docket No. 11-1, ¶¶6-7.
61. Mr. Francisco J. Iglesias-Alvarez submitted the additional documentation
requested on February 9, 2012, again directly from his residence in Spain. Docket No.
11-1, ¶8.
62. National Western's Claims Department paid Mr. Francisco J. Iglesias-Alvarez
the claim benefits of $1,643,600 arising under Annuity no. 1 on February 23, 2012, and
the benefits of $1,500,000 arising under Annuity no. 2 on March 13, 2012. The
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corresponding checks were sent directly to his address in Spain. Docket No. 11-1, ¶9 and
Exhibit D thereto.
63. Acknowledging that its legal implications are an issue in the case, it is
undisputed that on April 24, 2015, Francisco J. Iglesias-Alvarez, the Spanish national,
claiming to be the Francisco J. Iglesias identified as owner in Annuity no. 2, executed a
document entitled “Ratification of Annuity Policy Number 0101271540”. Exhibit 2 to
Docket No 41 (“Ratificación de Póliza de Anualidad o Contrato de Renta Anual Número
0101271540” and certified translation thereto), p. 1 ¶ 4; NW Docket No. 41-2, ¶8 and P’s
response at Docket No. 44-1.
LEGAL ANALYSIS
A. Annuity No. 2: Originally Ending in 0834, which Later Became the
Annuity Ending in 1540.
The Court begins its analysis out of chronological order with Annuity no. 2, as a
component of its analysis here is applicable to the issues presented for Annuity no. 1.
Annuity no. 2 had a rocky creation. It is undisputed that the agent who issued the
annuity initially, when it was originally assigned the number ending in 0834, was Carlos
García (“Mr. García) and his license had been suspended by the Insurance Commissioner,
and apparently also by NW itself. The annuity was cancelled by NW and a check was
issued to refund the premium to Mr. Iglesias, but before the check was mailed, the annuity
was then reissued by NW. This now became Annuity no. 2, and it was re-issued by a new
agent, Néstor Torres (“Mr. Torres”) and assigned a new number ending in 1540.
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As stipulated by the parties, Mr. Torres was sent a blank form by NW to reissue the
policy. Mr. Torres decided instead to use a copy of the original form for the annuity
ending in 0834 which was subsequently never issued, and which already contained Mr.
Iglesias’ signature on it.
This is contrary to NW’s policies, which require that the
signature of the policy be made in the agent’s presence, and further, pursuant to federal
anti-money laundering regulations, that there be an “in-person meeting with the
customer” where a visible comparison is made to confirm, via an official photographic
identification, that the person signing is, in fact, the correct party. See Docket No. 55.
Mr. Torres simply erased Mr. García’s signature on the form and substituted it with his
own.
NW has conceded that annuity ending in 0834 was invalid and was never issued,
but argues that Mr. Iglesias’ photocopied signature on its replacement, the annuity ending
in 1540, should nevertheless be considered valid because the fact that Mr. Iglesias signed
the original document proves he wished to establish the annuity and, thus, evidences
consent. While the Court is clear that Mr. Iglesias’ wish was to establish an annuity in
his brother’s favor, the particular one he actually signed was, in fact, never issued, a fact
expressly stipulated by the parties.
The Court is unconvinced that the re-issued annuity can be valid by simply using a
photocopied signature on a paper. What Mr. Iglesias signed was an annuity that was
never issued and is, therefore, invalid. While no caselaw has been cited by the parties for
this issue, the Court finds that a photocopy cannot serve to establish consent for such an
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important matter and where such a substantial amount of funds are at issue, much less
when NW’s regulations are clear on this matter and require an “in person” signature to be
obtained and a valid photo identification be presented.
Yet, the re-issued annuity also had a second problem. It lacked the signature of
the owner/beneficiary, Francisco Iglesias, the Spanish national. It is undisputed, and
NW so admits, that the signature on the re-issued form was not that of the intended
beneficiary or owner. Although the signature reads “Fco. J Iglesias”, it is uncontested
that the person who signed that name was not the Spanish national who ultimately
received the funds. See Uncontested Fact no. 58.
As is well known, the requirements for a valid contract under Puerto Rico law are
few and simple, to wit: (1) the consent of the contracting parties; (2) a definite object of
the contract; and (3) the cause for the obligation. P.R. Laws Ann. tit. 31, § 3391. Under
Puerto Rico law, consent of a party is invalid only if “given by error, under violence, by
intimidation, or deceit.” P.R. Laws Ann. tit. 31, § 3404; Sánchez-Santiago v. Guess, Inc.,
512 F.Supp.2d 75, 79 (D.P.R.2007); Soto v. State Chem. Sales Co. Int'l, 719 F. Supp. 2d
189, 191-92 (D.P.R. 2010) aff'd sub nom, Soto v. State Indus. Products, Inc., 642 F.3d 67
(1st Cir. 2011).
The “in person” signature by the owner/beneficiary was also a requirement by NW,
insofar as the parties agree that “[n]evertheless, the paperwork received from Mr. Torres
was incomplete when it was originally received, as on May 16, 2011 National Western
personnel noted in the underwriting copy for Annuity Policy Number 0101271540, that
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National Western “need[ed] to know if Francisco is owner – if so… he needs to sign all
ppk [paperwork].” See Uncontested Fact no. 50. Therefore, this was a requirement set
forth by NW itself, which was also not met at the time the policy was created. While the
subsequent signature was, in fact done in person and before Mr. Torres, the photo
identification was not performed as it is agreed upon that the owner/beneficiary, Mr.
Francisco Iglesias, the Spanish national, did not sign it. Therefore, he did not consent.
NW posits that “someone signed the application for Annuity Policy No. 2 on behalf
of Francisco J. Iglesias, evidencing the owner’s consent”. See Docket No, 73, p. 20. The
Court is flabbergasted as to how NW reached this conclusion, since NW has expressly
admitted that the person who received the funds was not the same person who signed the
annuity and even worse, that it does not know who the person who signed the annuity
even is. Therefore, it is clear that Francisco Iglesias, the Spanish national, did not sign
the document, and thus, could not and did not consent. This automatically voids the
annuity.
NW posits a second argument for this annuity’s validity, and states it is valid
because the person who ultimately received the funds, Francisco Iglesias, the Spanish
national, later ratified it. This argument is unavailing to NW for several reasons.
First, the person identified as owner of Annuity no. 2 is a “Francisco J. Iglesias”
with social security number 127 44 4919, and an address at P-9 Magnolia Ave., Bayamón,
Puerto Rico. That is the business address of the decedent, Mr. Iglesias, and where no
one resided. It is also undisputed that Francisco Iglesias is a citizen and resident of
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Spain, not Puerto Rico, and consequently has no Social Security number. Therefore,
there is an issue as to whether the person who received the funds in question is the same
party referred to in the annuity. Pursuant to the terms of the NW form filled out, the
parties’ own admissions, the identification data provided of the owner/beneficiary, and
the later attempts at ratification, it would seem that they are not the same person, even
though they have the same name.
NW wants the Court to hold that Mr. Iglesias’ intentions to help his brother “were
clear” with the issuance of the annuities and therefore, the person who ultimately received
the funds and the person indicated in the annuity are one and the same due to “the totality
of circumstances”. The Court cannot so conclude, precisely because the information
provided either by Mr. Iglesias to NW, or which was entered by NW in the annuity form
differs so greatly from reality. In other words, the Court cannot hold that a person who
is listed as living in Puerto Rico with a United States Social Security number is one and
the same as a citizen of Spain with no Social Security number and who has instead a
Spanish identification number, even if they share the same name.
Simply put,
Defendant has not put the Court in a position to rule in its favor.
Second, as NW correctly points out, consent to contracts may be supplied by a third
party who represents the contracting party upon its perfection. It consequently argues
that the “correct” Francisco Iglesias (Spanish national) gave the person who actually
signed the application authorization to do so, and thus, that person signed “on his behalf”.
See Docket No. 73, p. 17.
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Article 1211 of the Puerto Rico Civil Code expressly provides that: “[n]o one can
contract in the name of another without being authorized by him or without having his
legal representation according to law. A contract executed in the name of another by one
who has neither his authorization nor legal representation shall be void, unless it should
be ratified by the person in whose name it was executed before being revoked by the other
contracting party.” P.R. Laws Ann. tit. 31, § 3376; see also Kogan v. Registrador, 125
D.P.R. 636, 672 (1990). The validity of the representative’s consent, however, depends
on the existence of a mandate, and if there is no mandate, it depends upon the contracts’
subsequent ratification. Id. at 673. If a third party contracts in the name of another
without a mandate, the contract is not enforceable until it has been ratified – because the
contract lacks the consent of the real contracting party. Soto v. Rivera, 144 D.P.R. 500,
515 (1997).
Thus, what was needed in this case was a valid mandate, and its absence, a
ratification. There is no mandate in evidence. On the contrary, NW wants the Court to
make a leap and assume that there was a mandate, even when it admits that it was not the
beneficiary who signed the application and further, that it does not know who, in fact,
actually signed the document. Thus, the alleged consent provided to whomever signed
the application form cannot be valid, as Francisco Iglesias, the Spanish national, never
evidenced his consent for another to sign the annuity. Thus, Annuity no. 2, with the
signature provided, is invalid.
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While ratification can cure this situation, compounding the problem is that the
attempt at ratification here, which came much later, also fails. NW argues that Francisco
Iglesias, the Spanish national, later ratified the consent and thus, the annuity is valid.
Yet, the ratification here occurred on April 24, 2015, which was years after NW had
already disbursed the funds in February and March, 2012. Yet, under Puerto Rico law,
the contract was not enforceable until it was ratified.
Thus, NW could not legally
disburse the funds until after April 24, 2015, at which time Plaintiffs had already called
for the annuity’s invalidation.
The question then becomes whether Plaintiffs can
invalidate the contract here.
NW argues that Plaintiffs were not parties to the contract and cannot revoke it.
Under the explicit terms of the contract, however, the owner only had rights vis-a-vis the
contract while Mr. Iglesias was alive. Pursuant to Article II, section 2.1, of the annuity
contract, the annuity owner may exercise his or her rights only “while the Annuitant is
alive.” (Docket No. 11-3 at p. 25).
Therefore, all of Francisco Iglesias’ rights as the
“owner” terminated upon Mr. Iglesias’ death, as was found by Hon. Francisco A. Besosa,
District Judge, at Docket No. 25.1
So what is left here as the contracting parties are NW and Mr. Iglesias, the
deceased. Since Mr. Iglesias has no rights as a deceased person, Plaintiffs herein thus
1 This reasoning is also applicable to Defendant’s argument that the case lacks an indispensable party in
Francisco Iglesias, the Spanish national, because he received the funds at issue in this case. Besides the fact that the
Court has twice rejected this argument, a party cannot be indispensable if his rights under the contract were
extinguished, which they were here pursuant to the clear terms of the contract the moment Mr. Iglesias died. Besides,
no facts have changed that would warrant the Court to examine this issue anew.
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inherit his rights and are put in his shoes, as it were, because “a succession is the
transmission of the rights and obligations of a deceased person to his heirs.” P.R. Laws
Ann. tit. 31, §2081; see also Feliciano Suárez, Ex parte, 117 D.P.R. 402 (1986) (A
succession includes not only the rights and obligations of the deceased, in the condition
in which they existed at the time of his death, but it also includes the property belonging
to such succession after the same is opened, and the charges and obligations inherent
therein.”); Estate of Dávila v. Registrar, 15 P.R.R. 652 (1909) (“Heirs are the continuators
of the person of their predecessor in interest, and for that reason it cannot be said that
they are different persons”). Thus, Plaintiffs, as Mr. Iglesias’ heirs, have the same legal
right as Mr. Iglesias to revoke the annuity in question before it could be ratified, which
they did. Because of this, the ratification performed by Francisco Iglesias, the Spanish
national, in 2015 was ineffectual.
Simply put, consent by Francisco Iglesias, the Spanish national, had to be given at
the inception of the contract, not at the end, and it was not given at the inception. The
ratification performed was also invalid, for the reasons explained above.
In view of the above, Annuity no. 2 is null and void.
B. Annuity no. 1, ending in 0833.
Annuity no. 1 was issued by Marangelis Rivera (“Ms. Rivera”), who undisputedly
was unlicensed at the time she issued the annuity. Although she possessed a valid license
from NW as their agent, the license that is issued to agents by the Puerto Rico
Commissioner of Insurance, and by which authority NW presumably granted her
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authority to sell their insurance products in Puerto Rico, was falsified. Thus, Ms. Rivera
had no authority in Puerto Rico to issue the annuity in question.
The issue here is
whether the annuity is nonetheless valid. The Court finds it is not, and returns to facts
pertaining to Annuity no. 2 for its analysis.
As previously discussed, it is undisputed that the agent who created Annuity no. 2
when it was assigned the number ending in 0834 was Mr. García, and his license had been
suspended by the Insurance Commissioner, and apparently, by NW itself. NW argues
that courts have found that an otherwise valid insurance contract will not be voided
merely because the agent lacked a license and “what is more important is whether the
insurance company is authorized (licensed) by the respective authorities to issue the
policy in question”. However, the fact that original Annuity no. 2 (ending in 0834) was
cancelled by NW precisely because Mr. García lacked a license by both NW and the
Commissioner is telling.
The Court finds that the uncontested facts show that the
original Annuity no. 2 was cancelled not only because it lacked the signature of the owner,
making it automatically invalid, but because of the fact that the agent who issued it had
no license.
The stipulated facts state that the Office of the Insurance Commissioner had
suspended Mr. García’s license on September 13, 2010, and that prior to May 4, 2011 when
NW received the applications, NW had also terminated Mr. García’s agency contract
because he was facing disciplinary proceedings before the Puerto Rico Office of the
Commissioner of Insurance that raised questions as to the continued validity of his license
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as an agent. See Uncontested Fact nos. 38 and 39. It is on the basis of this that by May
9, 2011, NW prepared a check to reimburse Mr. Iglesias the funds received for the issuance
of the policy ending in 0834, and indicated in an email: “The 1.4 million dollar case we
cancelled out is on Carlos Iglesias-Alvarez #0101270834. We have the refund check ready
to be mailed out. Please let me know if we will or will not be reinstating the agent.” Thus,
NW believed original Annuity no. 2 was invalid because it had been issued by an agent
without a license, 2 and in fact, proceeded to issue a full refund check to Mr. Iglesias.
This is sufficient to find that the annuity issued by Ms. Rivera was likewise also void,
because if a lack of a license was applicable to the cancellation of original Annuity no. 2,
this reasoning has to be equally applicable to Annuity no. 1. NW clearly did not apply its
argument, that the important thing is that it was “authorized (licensed) by the respective
authorities to issue the policy in question”, to Mr. García’s policy, as NW cancelled it
precisely because of his lack of licenses. While it is true that Mr. García lacked both the
Puerto Rico Commissioner and NW licenses and Ms. Rivera lacked only the Puerto Rico
Commissioner’s license, her lack of a local license is sufficient to find the annuity void, as
will be explained in more detail below, because the Court finds that issues of public policy
apply to the instant case.
NW argues it did not know that Ms. Rivera’s license was a forgery and avers on this
basis that Annuity no. 1 is valid. It also posits that Ms. Rivera exceeded her mandate and
2 See also Uncontested Fact no. 56: “Pursuant to National Western’s records, Policy Number 0101270834
was never issued as a policy since the ‘agent’ that processed it was ‘un-appointed’ at the time the application paperwork
was prepared”.
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thus, NW should not be penalized. Further, it claims that jurisdictions have held the
policies sold by unlicensed agents are still valid. Plaintiffs argue that local public policy
considerations prevent enforcement of the document at issue.
Looking at Puerto Rico law on this matter, it is silent regarding whether a policy
issued by an unlicensed agent can nevertheless be valid. Instead, it simply states that
“no insurer… shall accept insurance applications transacted through a person who does
not hold a license issued according to th[e] Code for the kind of insurance transacted.”
P.R. Laws Ann. tit. 26, § 949j(1). It further provides that “[n]o insurer […] shall pay any
commission or compensation whatsoever for transacting insurance unless by the date the
same is due the person entitled to the same holds a license issued pursuant to this Code
for the kind of insurance transacted.” P.R. Laws Ann. tit. 26, § 949j(2). Thus, it would
seem that if the agent has no license, the company “should not accept” the policy and as
for the available remedies, the agent will not be paid a commission. A violation of this
requirement is subject to sanctions and deemed a misdemeanor punishable with a fine.
P.R. Laws Ann. tit. 26, § 949i. It is silent on whether such a contract is void.
Plaintiffs argue that Courts that have found such contracts enforceable in
jurisdictions have specifically provided for their validity via statute. Citing to Florida
law, they argue that it specifically states that policies sold by uninsured agents are
enforceable. Since there is no such legal statement in Puerto Rico law, Plaintiffs claim
they are unenforceable, and urge the Court to declare the annuity null. They further cite
to case law that establishes that, in those jurisdictions where the license requirement is
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predicated on public policy considerations of protecting the consumer, a policy issued by
an unlicensed agent is void.
In turn, Defendant argues the opposite, to wit, that because there is no strict
prohibition against invalidating a policy issued by unlicensed agents, it should be held
valid.
Puerto Rico’s Supreme Court has stated that the main objective of the license
requirement here is to protect the public, and that the insurance business carries with it
“substantial public interest”. San Miguel Lorenzana v. ELA, 134 D.P.R. 405, 414-415
(1993), citing Maryland Cas'y Co. v. San Juan Rac'g Assoc., Inc., 83 D.P.R. 559, 563
(1961); Comisionado v. Anglo Porto Rican, 97 D.P.R. 637, 640 (1969); Comisionado de
Seguros v. Tribunal Superior, 100 D.P.R. 546, 553 (1972). This was reaffirmed by the
drafters’ of the insurance code, which Plaintiffs persuasively cite. See Docket No. 74, p.
16. Also worthy of noting at this juncture is the long held principle under Puerto Rico
law which permits the contracting parties to establish the agreements, clauses, and
conditions convenient to them, provided they are not contrary to law, morals, or public
order. P.R. Laws Ann. tit. 31, § 3372; Flores v. Municipio de Caguas, 14 P.R. Offic. Trans.
674, 684 (1983).
The Court finds persuasive Plaintiffs’ argument that contracts are unenforceable
when they are entered into by unlicensed agents in other jurisdictions where the license
requirement is based on public policy considerations of consumer protection.
Particularly insightful is the quote from the Western District of Arkansas, which held that
Damaris Maldonado Viñas, et al., v. National Western Life Insurance Company
Civil No. 14-1192 (CVR)
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“[a]ny contract entered into by an unlicensed agent is void and unenforceable even though
the statute does not expressly declare such contracts to be void.
Such statutes are
adopted as a matter of public policy to further the public interest and their benefits cannot
be waived”. Dunn v. Phoenix Village, Inc., 213 F.Supp. 936, 947 (W.D. Ark. 1963).
Thus, to hold that the annuity here is enforceable would negate the intent of the
government to regulate the insurance business and the considerable public policy
concerns which are attached to that, and everyone would be at liberty to issue annuities
and policies without a license. The consumer cannot be said to be protected when an
unlicensed layperson, who lacks the expertise of a license and the knowledge which
accompanies it, sells such a highly regulated product. Surely that was not the intent of
the Legislature when it sought to regulate the insurance business.
See San Miguel
Lorenzana v. ELA, 134 D.P.R at 413 (“The government has ample discretion in the
establishment and implementation of norms and procedures regarding the admission to
practice different professions”... “The main purpose of the license requirement is to
protect the public...it guarantees the consumers that the people that possess a valid
insurance agent license are adequately qualified for the job”). Therefore, the Court finds
that Annuity no. 1 is null and void on public policy grounds.
Having found that both annuities are void under the aforementioned arguments,
the Court does not reach Plaintiff’s third argument, namely, that the annuities are void
because they were purchased with conjugal partnership funds and Mrs. Maldonado did
not consent in writing to their purchase.
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Now that it has held that both annuities are void, the Court considers the available
remedy. It has been held that a null and void contract can never be ratified, because “it
lacks one or more of its essential elements or because it contravenes a forbidden legal
precept and therefore, lacks the capacity to generate the intended, new legal outcome
desired by the parties”. José Ramón Vélez Torres, Curso de Derecho Civil: Derecho de
Contratos, Tomo IV, Vol. II, 1st ed., San Juan, 1990, p. 123. Regarding the effects of such
a contract, the Puerto Rico Supreme Court has held that “every null contract is inexistent
in law from the very moment in which it is issued or created, and therefore, never creates
any legal consequences”. Pérez Mercado v. Martínez Rondón, 130 D.P.R. 134, 150 (1992)
(quoting Santiago Marrero v. Tribunal Superior, 89 D.P.R. 835 (1964)). Hence, it is as
if the two annuities in the present case never existed. They never created a legal, binding
obligation.
Article 1255 of the Puerto Rico Civil Code, provides that “[w]hen the nullity of an
obligation has been declared, the contracting parties shall restore to each other the things
which have been the object of the contract with their fruits, and the value with its interest,
without prejudice to the provisions contained in the following sections.” P.R. Laws Ann.
tit. 31, §3514. Here, that object is the moneys Mr. Iglesias paid for in order to set up the
annuities. The moneys must be restored to Plaintiffs.
NW counters with the argument that “the Estate of Carlos Iglesias-Alvarez is
precluded from seeking repayment of the insurance premiums until such time as the
monies National Western paid to the sole beneficiary of Annuities Nos. 1 and 2, Francisco
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J. Iglesias-Alvarez, are returned in full”. Docket No. 73, p. 25. Citing to Louisiana Civil
law commentators Planiol & Ripert, it correctly posits that “[t]he general effect of nullity
is very simple: things should be put back into the same state as if the null contract had
not been executed”3, and thus, should the Court find in Plaintiff’s favor, it cannot pay
Plaintiffs until Plaintiffs are “in a position to refund” the amounts paid to Francisco
Iglesias.
Yet, NW forgets that it was NW itself who gave the moneys to Francisco Iglesias,
the Spanish national, not Plaintiffs. Thus, it is NW who must recover the funds, because
as Plaintiffs correctly point out Plaintiffs “cannot restore what has not been given to
them”. Docket No. 78, p. 18.
NW must deal with its own claim for reimbursement
against Francisco Iglesias, the Spanish national, separately.
NW’s argument is thus
inapposite.
CONCLUSION
For the aforementioned reasons, the Court DENIES Defendant’s Motion for
Summary Judgment (Docket No. 73), and GRANTS Plaintiffs’ Motion for Summary
Judgment (Docket No. 74).
Payment shall be made by Defendant to Plaintiffs in
accordance with this Opinion and Order. Judgment will be entered accordingly.
On a final note, the Court must commend both parties for their clear and wellarticulated arguments, the excellent quality of their work, and for diligently working on a
joint set of facts that could be used for both motions.
3
Planiol & Ripert, 2-1 TREATISE ON THE CIVIL LAW §1277.
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IT IS SO ORDERED.
In San Juan, Puerto Rico, on this 31st day of March, 2016.
S/CAMILLE L. VELEZ-RIVE
CAMILLE L. VELEZ RIVE
UNITED STATES MAGISTRATE JUDGE
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