Alan P. Woodruff v. National Life Insurance Company

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 09a0541n.06
No. 08-5499
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ALAN P. WOODRUFF,
Plaintiff-Appellant,
v.
NATIONAL LIFE INSURANCE
COMPANY,
Defendant-Appellee.
/
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF TENNESSEE
BEFORE: COLE, CLAY, and KETHLEDGE, Circuit Judges.
CLAY, Circuit Judge. This is a diversity contract action that proceeded to a bench trial.
Plaintiff-Appellant Alan P. Woodruff, proceeding pro se, appeals the district court’s entry of
judgment in favor of National Life Insurance Company on his claims alleging breach of contract
under Tennessee law. For the reasons that follow, we AFFIRM the judgment of the district
court.
BACKGROUND
A. Procedural History
Woodruff filed suit against Defendant-Appellee National Life Insurance Company
(“Defendant”) in the Sevier County, Tennessee Circuit Court, claiming monetary losses for

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breach of life insurance contracts that he had acquired by assignment. Defendant timely
removed the case to federal court based on diversity of citizenship and an amount in controversy
in excess of $75,000 under 28 U.S.C. § 1332(a)(1).
Woodruff filed a motion for summary judgment, which the court denied. The case
proceeded to a bench trial on October 30, 2006. On April 10, 2008, the district court issued
findings of fact and conclusions of law, ultimately holding that Defendant did not breach any of
the life insurance contracts that had been assigned to Woodruff. On that date, the court entered
final judgment against Woodruff, who filed a timely notice of appeal.
B. Substantive Facts
After considering the submissions of the parties and the testimony presented at
Woodruff’s bench trial, the district court prepared findings of facts and conclusions of law,
which are summarized below.
In 1988 and 1989, John Ward and Daniel Edgar, neither of whom are parties to this case,
purchased three life insurance policies from Defendant. Each of the policies provided that the
cash value of the policies would accrue as the annual premiums were paid, and that the policies’
net cash value could be paid to the policy owner should the policy be surrendered prior to his
death. The policies defined net cash value as:
1. the Cash Value; plus
2. any remaining dividends held; plus
3. the value of any dividend additions in force; less
4. any debt to us on the policy.
(Record on Appeal (“ROA”) 74.)
The policies also contain the following language:

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The debt secured by this policy includes loans, unpaid loan interest
and accrued loan interest not otherwise due. All or any part of the
debt may be paid at any time prior to 1. the death of the Insured;
and 2. default in payment of any premium unless the policy is in
force as paid up life insurance; and 3. surrender of the policy while
in force as paid up life insurance. When any of these events
occurs, all debt shall become due at once. It shall then be paid
from the policy values.
(Id. at 78.)
After purchasing the life insurance policies for themselves, Ward and Edgar entered into
“split dollar agreements” (“SDAs”) with their employer, the Cape Coral Medical Center (“Cape
Coral”). Pursuant to the SDAs, Cape Coral agreed to pay the premiums on the policies, while
Ward and Edgar assigned the cash value of the policies—the amount payable upon the
“surrender” of the policies before the death of the insured—to Cape Coral. More specifically,
under the SDAs, Cape Coral received a promise from Ward and Edgar that it would receive
either a refund of all the premiums it had paid on the insurance policies or the entire cash value
of the policy, whichever was lesser, when an insurance policy was surrendered. The assignment
forms executed by Ward and Edgar indicate that the assignments were “subject to all the terms
and conditions of the Policy and to all superior liens, if any, which the Insurer (National Life)
may have against the [P]olicy.” (Id. at 76.) The SDAs define cash value as “the cash surrender
value as defined in the policy, including the cash value of any paid-up additional insurance.”
(Id. at 79.)
In 1995, Cape Coral stopped paying the annual premiums on the policies, but the policies
were not surrendered for their cash value. The district court found that although there was no
direct evidence of why the parties stopped paying the premiums, there was evidence that Ward

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and Edgar had been indicted and convicted of embezzlement for transactions ending in 1994.
The court stated that this circumstance “likely account[ed] for the cessation in the payment of the
annual premiums for the life insurance policies.” (Id. at 76-77.) Defendant maintained the
policies by funding premium payments with loans from the policies, as authorized under the
policy terms.
On April 7, 2005, Cape Coral transferred its interests in the three policies to Woodruff.
Later that year, Woodruff surrendered the policies to Defendant for payment of their cash values.
Defendants paid Woodruff, but deducted the principal and interest owed on the premium loans
made to maintain the policies from 1995 to 2005. Woodruff thereafter filed suit, claiming
compensatory and punitive damages for alleged unauthorized deductions of the policyholder
loans from the policy cash values. He alleged that the improper deductions of loans and loan
interest on the three policies resulted in shortfalls of $56,537.10 on policy number 2102499,
$14,2236.01 on policy number VL0029793, and $9,663.62 on policy number 2090868. He
claimed that these deductions violated the SDAs and the terms of the policies and he therefore
objected to the surrender cash values he received.
The case proceeded to a bench trial, in which Ward testified that the SDAs and collateral
forms were provided to him by representatives of “Life Planning Associates” who were acting as
agents of Defendant. Defendant denied these allegations and the district court found that there
was no competent proof that Defendant created or participated in the creation of the SDAs or the
collateral agreements attached to them, and that even if it did, Defendant was not a party to any
of the agreements and did not participate in their execution.

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Woodruff also testified that no notices were sent indicating that the claims exceeded the
value of the policies. Likewise, Ward testified that he did not receive notice that the value of the
policies was insufficient to pay the annual premiums. After considering this testimony and the
contents of the policies, the district court found that “there was no basis for National Life to send
notice to the owners pursuant to the language of the policies.” (Id. at 79-80.)
The district court ultimately entered judgment in favor of Defendant, finding that
Defendant did not breach the terms of the life insurance contract assigned to Woodruff. In
support of its judgment, the district court issued conclusions of law that corresponded to specific
issues raised by Woodruff in his “Second Amended Proposed Findings of Fact and Conclusions
of Law.” In its first conclusion of law, the court found that, contrary to Defendant’s position,
Woodruff had standing to assert his claims. The court found in favor of Defendant with respect
to the remaining issues. More specifically, the court found:
The split dollar agreements and the collateral assignments
were contracts that were entered into by Ward and Edgar with their
employer at Cape Coral. National Life was not a party to those
agreements; it was not a beneficiary of those agreements; and it
had no obligations under those agreements. The life insurance
policies that had been purchased prior to the execution of the split
dollar agreements are referenced and are incorporated in part into
the split dollar agreements, but they are not controlled by or
subject to the terms of the split dollar agreements. The split dollar
agreements incorporate the definition of cash surrender value from
the policies and the collateral assignments specifically reference
the agreements being “subject to all the terms and conditions of the
Policy.” The split dollar agreements were side contracts that
Ward, Edgar, and Cape Coral entered into regarding how the
annual premiums on the life insurance policies would be paid. The
agreements were theirs not National Life’s and there is no basis to
find that National Life potentially could or did breach those split
dollar agreements on any basis.

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There is also no basis for National Life to have considered
or included Cape Coral’s and subsequently Woodruff’s claim
under the split dollar agreements as a claim or “debt” against the
policy. The policies include in the definition of net cash value
“any debt to us on this policy.” There is also no language under
the policies definitions of policy loan, loan value, or debt that
could conceivably encompass outside claims or “debt” against the
policy as asserted by Woodruff. Thus, there is no showing that the
policy debt equaled or exceeded the loan value triggering any
notice requirement. Therefore, there is also no showing that
National Life improperly calculated the surrender cash value of the
three policies when it subtracted the loan and loan interest amounts
from the cash value and dividends on each policy surrendered by
Woodruff.
(Id. at 81-82.) Finally, the court found that because Woodruff was not entitled to recover from
Defendant, it did not need to address the issue of punitive damages. However, the court also
stated that punitive damages would not be appropriate because the case did not involve fraud,
malice, gross negligence, or oppression. The court entered judgment in favor of Defendant, and
Woodruff filed this timely appeal.
DISCUSSION
Standard of Review
When a case proceeds to a bench trial, this Court reviews the district court’s conclusions
of law, including contract interpretations, de novo, and its findings of fact for clear error. Dillon
v. Cobra Power Corp., 560 F.3d 591, 599 (6th Cir. 2009). When jurisdiction is based on
diversity of citizenship, state substantive law is used when interpreting contract provisions. See
Hickson Corp. v. Norfolk S. Ry. Co., 260 F.3d 559, 566 (6th Cir. 2001). In this case, Tennessee
substantive law applies. (ROA 80 (“At the pretrial conference, it was decided that Tennessee
law would be applied in this case.”).)

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I.
In Woodruff’s first assignment of error, he argues that the district court erred in holding
that Defendant was not bound by the SDAs and the collateral assignments executed by the policy
owners. Woodruff’s argument is somewhat confusing, but he appears to contend that the SDAs
are binding on Defendant and override the terms of the policies because: (1) the SDAs were
expressly incorporated into the insurance policies issued by Defendant; (2) Defendant
acknowledged the controlling effect of the SDAs when it accepted premiums from Cape Coral
and Woodruff; and (3) Defendant is bound by the representations of its agents. For the reasons
discussed below, each of these arguments fails.
A.
The district court found that because Defendant did not participate in the formation of the
SDAs and was not a party to the SDAs, it could not be bound by any language set forth in the
SDAs. Woodruff, however, contends that the SDAs were “incorporated into” the policies and
therefore supercede them. He offers two primary arguments in this regard.
First, he argues that the SDAs were incorporated into the challenged insurance policies
because “the terms of the [SDAs] expressly and unambiguously state that the policies were
applied for, and issued, subject to the terms of the [SDAs]. Therefore the terms of the [SDAs]
must, as a matter of law, be deemed to be incorporated into the insurance policies.” Pl’s Br. at 7.
This argument is circular and misguided. It is unclear how the policies could be “applied for,
and issued, subject to the terms of” the SDAs when the SDA assignments necessarily were

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executed after the policies were issued. Woodruff offers no record citation or legal authority to
support his position. Moreover, Woodruff’s position is expressly contradicted by the language
of the assignment forms, which state that Ward and Edgar assigned Cape Coral the life insurance
policies “subject to all the terms and conditions of the Policy and to all superior liens, if any,
which the insurer (National Life) may have against the [P]olicy.” (ROA 76.) Consequently, the
SDA assignments were expressly made subject to the terms of the policy, not vice versa as
Woodruff suggests. Woodruff’s “express incorporation” argument therefore fails.
Woodruff also argues that the SDAs were incorporated into the policies because the
policies state that the owner may “assign the policy” and provides that “[t]he interest of any
beneficiary whom the assignor can change and of any contingent owner shall be transferred to
the assignee by the terms of the assignment.” Pl’s Br. at 9 (emphasis in original); (Ex. 4-A,
Policy at 2.). The policy language that Woodruff cites is inapposite. It is undisputed that under
the terms of the policies, a policy owner is entitled to assign policy benefits to other
beneficiaries; Defendant in fact recognized the assignments by accepting Woodruff as a
legitimate assignee when he surrendered the policies. Defendant’s recognition of the
assignments, however, does not logically support an additional conclusion that Defendant agreed
to be bound by the terms of the SDA or that the SDA language would override the language of
its insurance policies. Therefore, Woodruff’s “assignment” argument lacks merit as well.
B.
Next, Woodruff argues that Defendant “chose to recognize the binding effects of certain
provisions of the [SDAs]—provisions which differed from provisions contained in the policies

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themselves” and therefore acknowledged the “controlling effect of the [SDAs] and Collateral
Assignments.” Pl’s Br. at 9. More specifically he argues that Defendant became bound by the
terms of the SDAs when it sent premium notices to Cape Coral and paid the net cash value of the
policies to him.
Woodruff cites to no case law to support his assertion, and we deem the issue waived.
See United States v. Williams, 544 F.3d 683, 690 (6th Cir. 2008) (arguments are waived when an
appellant “fail[s] to develop or support his argument with any legal authority”); United States v.
Layne, 192 F.3d 556, 566-67 (6th Cir. 1999) (“[I]ssues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation, are deemed waived[.]”) (internal
quotation marks and citation omitted).
Moreover, this argument is based on a false premise. As stated above, the recognition of
the assignment does not logically support an additional conclusion that Defendant agreed to be
bound by the SDAs or that the SDA language would override the language of its insurance
policies. To the contrary, the assignment forms state that the assignee was assigned the policies
“subject to all the terms and conditions of the Policy[.]” (ROA 76.) Consequently, we reject
Woodruff’s argument that Defendant became bound by the terms of the SDAs when it
recognized the assignment.
C.
Finally, Woodruff argues that the SDAs “supercede the terms and conditions of the
policies” because Defendant is bound by the representations of its agents who stated that the
SDAs would be binding. Pl’s Br. at 10. More specifically, he argues that “the subject insurance

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policies were purchased by Ward and Edgar, with the assistance of [Cape Coral] based on
representations made by National Life’s agents that their respective interests in the policies, as
stated in the [SDAs] would be controlling.” Id.
In support of this argument, Woodruff cites to cases that establish that an insurance
company is bound by the representations of its agents, Bill Brown Constr. Co, Inc. v. Glens Falls
Ins. Co., 818 S.W.2d 1, 4 (Tenn. 1991), and that a contract should be interpreted in a manner that
gives effect to the intention of the parties, Bob Pearsall Motors, Inc. v. Regal Chrysler-
Plymouth, Inc., 521 S.W.2d 578, 580 (Tenn. 1975). These cases are inapposite, however,
because Woodruff fails to establish that an agent of Defendant made the alleged representations.
Woodruff does not identify the alleged agent in his brief, but he appears to be referring to
representatives of an organization named “Life Planning Associates” who provided Ward with
the SDAs and collateral forms. However, in the district court’s findings of fact, the court stated:
Ward testified that the [SDAs] and collateral forms were provided
by Mr. Sousa and Mr. Calcateria of Life Planning Associates who
were acting as agents of National Life. In responses to requests to
admit that are in the record, National Life denied that the [SDAs]
were drafted by National Life. There is no competent proof that
National Life created or participated in the creation of the [SDAs]
or the collateral agreements attached to them.
(ROA 77-78.) While Ward did testify that the aforementioned individuals were “agents” of
Defendant, the district court rejected his testimony and credited Defendant’s denial of any
involvement in the creation of the SDAs. The district court repeatedly noted that Ward was a
convicted felon, and the trial transcript reveals that he had been convicted of a crime of
dishonesty and that he acknowledged that he was a close personal friend of Woodruff’s. The

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court therefore had ample reason to find that Ward lacked credibility. See Anderson v. City of
Bessemer City, 470 U.S. 564, 575 (1985) (“When findings are based on determinations regarding
the credibility of witnesses, Rule 52(a) demands even greater deference to the trial court’s
findings[.]”); Madden v. Chattanooga City Wide Serv. Dep’t, 549 F.3d 666, 673-74 (6th Cir.
2008) (“On appeal from a judgment following a bench trial, a district court’s findings of fact
‘must not be set aside unless clearly erroneous, and the reviewing court must give due regard to
the trial court’s opportunity to judge the witnesses’ credibility.’”) (quoting Fed. R. Civ. P.
52(a)(6)). Because the court’s factual findings contradict Woodruff’s assertion that agents of the
Defendant made representations that the SDAs would be binding on Defendant, Woodruff’s
argument therefore also fails.
In sum, none of the arguments Woodruff advances supports a conclusion that the SDAs
overrode the terms of the contested insurance policies or that Defendant agreed to be bound by
the SDAs. Consequently, the district court did not err when it concluded that Defendant was not
bound by the terms of the SDAs.
II.
In his second assignment of error, Woodruff argues that the district court erred in holding
that the premium loans made by Defendant were not barred by the language of the insurance
policies. He contends that the loans made by Defendant were improper because: (1) the loans
violated the preconditions set forth in the policies; (2) the loans exceeded the amounts permitted
by the policies; and (3) Defendant improperly charged Cape Coral interest on loans that Cape
Coral did not authorize. Again, each of these arguments fails.

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In Woodruff’s Second Amended Proposed Findings of Fact and Conclusions of Law,1
Woodruff set forth the issues he wanted the district court to consider in its bench trial and judgment.
This filing did not address the issue of dividends.
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A.
Woodruff argues that Defendant made loans in violation of policy preconditions. First,
he states that the policies contain a precondition that “any dividends held must be applied to pay
the premiums before a policy loan will be made,” and that Defendant “did, in fact, use dividends
to purchase additional insurance rather than reduce the amount of premiums paid with loans[.]”
Pl’s Br. at 12; (Ex. 4-A, Policy at 1.). However, Woodruff does not cite to evidence that would
establish that dividends were used to purchase additional insurance in lieu of paying premiums.
Moreover, this issue was not addressed in the district court’s findings of fact, and our review of
the record reveals that Woodruff failed to raise this issue before the district court.1
Consequently, we consider the issue waived. See Scottsdale Ins. Co. v. Flowers, 513 F.3d 546,
552 (6th Cir. 2008) (“[A]n argument not raised before the district court is waived on appeal to
this Court.”).
Woodruff also argues that the policies contained a precondition that “[t]he Owner must
file at our Home Office a written request for Automatic Premium Loans” and that Cape Coral
“never consented to any of the Automatic Premium Loans that impaired its interest in the
policies.” Pl’s Br. at 12-13. He appears to concede that the original policy owners, Ward and
Edgar, authorized the loans. His argument, then, suggests that the policies required Defendant to
obtain a new request for automatic premium loans from Cape Coral, the assignee, when it was
assigned the policies. He points to no record evidence or legal authority that would support this

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position, and again, we deem the issue waived. See Williams, 544 F.3d at 690; Layne, 192 F.3d
at 566-67.
B.
Woodruff next argues that Defendant improperly charged the policies with loans in
excess of those permitted by the policies. He argues that under the policies, Defendant’s
authority to charge the policies with loans to pay premiums ceased when “the total outstanding
debt equal[ed or] exceed[ed] the cash values.” Pl’s Br. at 13.
Woodruff’s argument turns on his definition of the term “debt.” He claims that total debt
includes both the loan amounts owed to Defendant and “the amounts owed to” Cape Coral as the
assignee. The district court rejected this argument, stating that there was “no basis for
[Defendant] to have considered or included Cape Coral’s and subsequently Woodruff’s claim
under the [SDAs] as a claim or ‘debt’ against the policy.” (ROA 81.) The court further stated
that there was “no language under the policies definitions of policy loan, loan value, or debt that
could conceivably encompass outside claims or ‘debt’ against the policy as asserted by
Woodruff.” (Id. at 82.)
The district court’s conclusions are well-founded. As the district court noted, the policies
specify that “debt” consists of loans and unpaid loan interest; there is no language in the policies
that suggests that the assigned interests of Cape Coral are “debt” against the policies. (Id. at 78
(“The debt secured by this policy includes loans, unpaid loan interest and accrued loan interest
not otherwise due.”).) Moreover, the Tennessee Supreme Court has explained that “[w]hen
resolving disputes concerning contract interpretation, [a court’s] task is to ascertain the intention

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of the parties based upon the usual, natural, and ordinary meaning of the contractual language.”
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999). Here, the ordinary meaning of the term
“debt” does not encompass Woodruff’s strained understanding of the term. Furthermore, in their
ordinary meaning, the terms “loans, unpaid loan interest and accrued loan interest” (which are
used to define “debt” in the policies), do not refer to potential claims for cash value by a policy
owner or assignee. Consequently, Woodruff’s argument that the cash value of the policies was
exceeded by total outstanding debt is without merit, and the district court did not err when it
determined that the loans were proper.
C.
Woodruff next argues that the interest charges on premium loans made by Defendant
were improper. He bases this position upon two primary assertions: (1) that the SDAs did not
permit loans that exceeded the cash value of the policies; and (2) that the assignee had to
personally authorize any loans and interest that would be used to pay premiums. As discussed
above, both of these assertions are unsupported by the record, and we therefore reject
Woodruff’s claims that the interest charges were improper.
III.
In his third assignment of error, Woodruff argues that the district court erred in
permitting Defendant to assert a claim that extinguished the rights of a superior lien holder. He
argues that it is “beyond dispute that the parties intended for the policies to provide security
assuring that [Cape Coral] would recover premiums paid by it” as evidenced by “both the
[SDAs] and the Collateral Assignments.” Pl’s Br. at 25-26. He argues that the district court

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As discussed above, the policies state that “[t]he debt secured by this policy includes loans,2
unpaid loan interest and accrued loan interest not otherwise due.” (ROA 78.)
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failed to address the priority of interests in the case and that there was “simply no justification
for allowing National Life to recover, in full, the funds ‘owed’ to it[.]” Id. at 26.
Woodruff’s position—that the SDA claims are superior to the policy loans—is
contradicted by both the policies and the SDAs. The policies state that the “net cash value”
payable on surrender of the policies would be reduced by “any debt to us [National Life] on the
policy.” (ROA 74.) Moreover, the SDA assignment forms state that the assignment was made
“subject to all the terms and conditions of the Policy and to all superior liens, if any, which the
Insurer (National Life) may have against the [P]olicy.” (Id. at 76.) Under the plain language of
the policies, which the SDAs explicitly accepted, the surrender value of the policies was to be
reduced by “debt” to Defendant. Consequently, the district court did not err in permitting2
Defendant to recover the loans made under the policies.
IV.
Finally, Woodruff argues that the district court erred in holding that he was not entitled to
punitive damages. This issue has become moot in light of our determination that Defendant did
not breach the insurance contracts assigned to Woodruff.
CONCLUSION
For the reasons stated above, we AFFIRM the district court’s judgment.

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