Filed: Jun. 03, 2003
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 2003 Decisions States Court of Appeals for the Third Circuit 6-3-2003 Gouge v. Metro Life Ins Co Precedential or Non-Precedential: Non-Precedential Docket No. 02-4252 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2003 Recommended Citation "Gouge v. Metro Life Ins Co" (2003). 2003 Decisions. Paper 487. http://digitalcommons.law.villanova.edu/thirdcircuit_2003/487 This decision is brought to you for free and open access by the Opin
Summary: Opinions of the United 2003 Decisions States Court of Appeals for the Third Circuit 6-3-2003 Gouge v. Metro Life Ins Co Precedential or Non-Precedential: Non-Precedential Docket No. 02-4252 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2003 Recommended Citation "Gouge v. Metro Life Ins Co" (2003). 2003 Decisions. Paper 487. http://digitalcommons.law.villanova.edu/thirdcircuit_2003/487 This decision is brought to you for free and open access by the Opini..
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Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
6-3-2003
Gouge v. Metro Life Ins Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 02-4252
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2003
Recommended Citation
"Gouge v. Metro Life Ins Co" (2003). 2003 Decisions. Paper 487.
http://digitalcommons.law.villanova.edu/thirdcircuit_2003/487
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2003 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-4252
DANNY LEECE GOUGE,
MERRIETTA KAY GOUGE,
Appellants,
v.
METROPOLITAN LIFE INSURANCE COMPANY,
JACK E. DUCKWORTH,
Appellees.
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 97-CV-1020)
District Judge: The Honorable Donetta W. Ambrose
Submitted under Third Circuit LAR 34.1(a)
Friday, May 16, 2003
Before: RENDELL, SMITH and ALDISERT, Circuit Judges.
(Filed: June 3, 2003)
OPINION OF THE COURT
ALDISERT, Circuit Judge.
Danny Leece Gouge and Merrietta Kay Gouge, the insureds under certain
insurance policies issued by Metropolitan Life Insurance Company, appeal from the
district court’s decision to grant summary judgment in favor of the company and agent
Jack Duckworth on the grounds that the Appellants’ fraudulent representation claims
were barred by state statutes of limitations. The law of North Carolina applies in this
diversity action. Because we agree with the district court’s decision, we will affirm
without reaching the merits of Appellants’ substantive claims that Duckworth had made
fraudulent oral misrepresentations in inducing them to purchase a number of insurance
policies.
I.
As we write only for the parties who are familiar with the facts and contentions
raised, we will limit our discussion to the controlling legal issues.
Because Appellants did not raise the issue of the proper length of the statute of
limitations for an alleged breach of a fiduciary duty in the district court, we will not notice
this argument. Gass v. Virgin Islands Tel. Corp., 311 F.3d 237, 245 (3d Cir. 2002)
(noting that the “failure to raise an issue in the district court constitutes a waiver of that
argument”). We shall instead confine ourselves to the statutes of limitations for
fraudulent representation.
North Carolina General Statute § 1-52(9) states that a claim “[f]or relief on the
grounds of fraud or mistake” must be filed within three years of the aggrieved party’s
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“discovery . . . of the facts constituting the fraud or mistake.” Under this provision,
“discovery” means actual discovery or when the fraud should have been discovered in the
exercise of reasonable diligence. Grubb Props. Inc. v. Simms Inv. Co., 400 S.E.2d 85, 88
(N.C. App. 1990) (concluding that plaintiff failed to exercise reasonable diligence as a
matter of law where it neglected to discover for nearly four years that a tract of land was
not included in a deed). Almost 70 years ago, the North Carolina Supreme Court
remarked that:
[a] man should not be allowed to close his eyes to facts observable by
ordinary attention and maintain for his own advantage the position of
ignorance. Such principle would enable a careless man, and by reason of
his carelessness, to extend his right to recover for an indefinite length of
time, and thus defeat the very purpose the statute was designed and framed
to accomplish.
Moore v. Fidelity and Casualty Co., 177 S.E. 406, 408 (N.C. 1934).
II.
It is against these statutes and case law precepts that we examine the adjudicative
facts present here.
When the policies were issued, the Appellants owned and operated both Gouge
Trucking Company (which earned almost $12 million in one year) and Gouge Tire
Company, and operated a tobacco farm for Mr. Gouge’s father. They owned 120 acres of
property in Greenville, Tennessee and a 2½-acre property in Burnsville, North Carolina.
At the time of her deposition, Mrs. Gouge owned and operated a drug and alcohol testing
business, which also included a trucking business.
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Each policy contained the following general provisions:
The Contract. This policy includes any riders and, with the application
attached when the policy is issued, makes up the entire contract. All
statements in the application will be representations and not warranty. No
statement will be used to contest the policy unless it appears in the
application.
***
Limitation on Sales Representative’s Authority. No sales representative or
other person except our President, Secretary, or a Vice-President may a)
make or change any contract of insurance; or b) change or waive any of the
terms of the policy. Any change must be in writing and signed by our
President, Secretary or Vice-President.
Joint Appendix at 519, 540 (emphasis added). Aside from noting this inability of sales
representatives to modify the terms of the contract, the life insurance policies issued by
Metropolitan Life through its agent, Jack Duckworth, also contained clear language
explaining their terms and the premium payment obligations. The word “retirement”
never appeared in any of the policies issued to the plaintiffs. The words “life insurance”
however, appear on the cover page, and the policies make multiple references to the word
“insurance.”
In their suit, the Gouges complained that Duckworth told them that the premiums
for the policies “would need to be paid for only five years, or possibly six years.” Id. at
22. When questioned about the language that appeared in their policies, the Appellants
admitted that their policies instead required premiums for the number of years stated on
paper. During their depositions, the Gouges also testified that Duckworth wrote
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comments on the policy illustrations regarding the length of premium payments and the
monthly income payments that they would receive. Id. at 180-187, 427, 432. The
policies, however, do not contain a single reference to a monthly income amount that
would be received. Mr. Gouge further admitted that he understood if he stopped making
payments the policy would lapse.
In contrast to their present allegations that they thought that they were buying
retirement policies, the Gouges have acknowledged that they knew at the time of the
purchase of their policies that they were buying life insurance. In a written complaint to
the North Carolina Department of Insurance, Mr. Gouge stated he “was approached by
Mr. Jack Duckworth of Metropolitan Life . . . to purchase a life policy for myself and my
wife.” Id. at 288. In their civil complaint, the Gouges alleged that “Duckworth suggested
[they] should buy life insurance” – albeit for retirement purposes, thus conceding that
they knew the nature of what they were buying.
Id. at 21-22.
A review of the Gouges’ financial statements for their trucking business reveals
that the cash values of their life insurance policies were declared an asset of their
business. During her deposition, Mrs. Gouge testified that Duckworth was presenting a
life insurance policy and that the Gouges knew that they were buying insurance. Id. at
376, 380, 385. She further testified that, on a number of occasions after she received her
policy, she was concerned that the word “retirement” did not appear anywhere on her
documents. Notwithstanding these concerns, the Gouges continued to pay premiums for
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their six life insurance policies. It was not until 1997 – seven years after the first policy
was issued and almost 4½ years after the last policy was issued – that they filed a
complaint against Metropolitan Life.
Appellants were provided ample opportunity – and indeed had the legal obligation
– to read the policies and to return them if they were not satisfied. They simply chose not
to do so. Had the married businesspeople read their policies, they would have seen
immediately that they had a long-term, ongoing obligation to pay premiums and that they
purchased life insurance policies. Appellants’ failure to exercise the right to return the
policies constituted acceptance by which they are now bound.
The limitations period for their fraudulent representation claim is three years. The
policies were purchased between December 1989 and September 1992, and the Gouges
were put on actual notice of the discrepancies between the express written terms of the
policies and the alleged oral representations made to them when they received their
policies. Nevertheless, they did not bring the lawsuit until November 1996 after the
expiration of the limitations period.
Under North Carolina law, policyholders are under a duty to read their insurance
policies. Elam v. Smithdeal Realty & Ins. Co., 109 S.E. 632, 634 (N.C. 1921). Where a
party has reasonable opportunity to read the instrument in question and the language of
the instrument is clear, unambiguous, and easily understood, failure to read the instrument
bars that party from asserting his belief that the policy contained provisions which it does
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not. Baggett v. Summerlin Ins. & Realty Co., 554 S.E.2d 336 (N.C. 2001) (citing Baggett
v. Summerlin Ins. & Realty Co.,
545 S.E.2d 462, 468-469 (N.C. App. 2001) (Tyson, J.,
dissenting).
In light of the foregoing, we agree with the district court that Appellants’ claims
were barred by the statute of limitations.
*****
We have considered all contentions raised by the parties and conclude that no
further discussion is necessary.
The judgment of the district court will be affirmed.
TO THE CLERK:
Please file the foregoing not precedential opinion.
/s/ Ruggero J. Aldisert
Circuit Judge
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