The Honorable George Howard, Jr., United States District Judge for the Eastern 1

District of Arkansas.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 96-3545

___________

All American Life Insurance Company, *

*

Plaintiff, *

* Appeal from the United States

v. * District Court for the

* Eastern District of Arkansas.

Annette Billingsley; Andrew Vaccaro, *

Jr.; Joseph Vaccaro; Laurie Hiegel, *

*

Appellees, *

*

Agribank FCB, *

*

Appellant. *

___________

Submitted: May 21, 1997

 Filed: August 29, 1997

___________

Before MURPHY, HEANEY, and MAGILL, Circuit Judges.

___________

MAGILL, Circuit Judge.

The All American Life Insurance Company (All American)

filed this interpleader diversity action in the district

court to determine whether the proceeds of Andrew 1
During its years of business with the Vaccaros, Agribank went through several 2

reorganizations. Agribank was formerly known as the Federal Land Bank of St. Louis

and the Farm Credit Bank of St. Louis. For the sake of consistency, we will only refer

to "Agribank."

The parties stipulate that, had it not lapsed, the Executive Life policy would

3

have been valued at $464,447.62 upon maturity.

Andrew, Jr. and Joseph also brought a tort claim against Agribank for

4

Agribank's alleged negligent impairment of collateral. A jury empaneled by the district

court returned a verdict for Andrew, Jr. and Joseph on their tort claim, and found

damages of $38,405. In addition to appealing the district court's equitable decisions

on waiver and estoppel, Agribank had originally appealed the district court's judgment

against Agribank on Andrew, Jr. and Joseph's tort claim, as well as the district court's

determination of Agribank's setoff rights.

-2-

Vaccaro, Sr.'s $500,000 life insurance policy should go

to Agribank FCB (Agribank) or to Andrew Vaccaro, Sr.'s

2

four children: Andrew Vaccaro, Jr., Joseph Vaccaro,

Annette Vaccaro Billingsley, and Laurie Vaccaro Hiegel

(collectively, the Vaccaros). Andrew, Jr. and Joseph

owed $728,581.14 to Agribank, secured by the American

Life policy and a separate $500,000 policy from Executive

Life Insurance Company (Executive Life). The Executive

Life policy lapsed shortly before Andrew Vaccaro, Sr.

died. At the core of the dispute between the Vaccaros

and Agribank is whether the Vaccaros waived their rights

to the proceeds from the American Life policy and whether

Agribank is equitably estopped from disclaiming that

$464,447.62 of Andrew, Jr.'s and Joseph's debts was

3

satisfied by the lapsed Executive Life policy. The

district court found for the Vaccaros on these equitable

issues.

During the pendency of this appeal, Agribank settled

all of its disputes with Andrew, Jr. and Joseph.4
During the pendency of this appeal, Agribank reached a settlement agreement

with Andrew, Jr. and Joseph as to all claims. Agribank, Andrew, Jr., and Joseph

subsequently filed a joint motion to dismiss Andrew, Jr. and Joseph from this appeal.

We grant this motion.

-3-

Agribank now appeals the district court's equitable

decisions 
-4-

that Billingsley and Hiegel did not waive their rights to the proceeds from the

American Life policy and that Agribank is equitably estopped from disclaiming that

$464,447.62 of Andrew, Jr.'s and Joseph's debts--which were secured by the American

Life policy--was satisfied by the lapsed Executive Life policy. We affirm.

I.

Andrew Vaccaro, Sr., Andrew, Jr., and Joseph owned a

3200-acre family farming operation in Lee and St.

Francis Counties, Arkansas. Their corporation, Vaccaro

Farms, Inc. (VFI), operated from the 1970s until 1992.

In 1981, VFI borrowed $3,100,000 from Agribank to

purchase an additional 1800 acres of farmland. Shortly

thereafter, a series of factors proved the investment

ill-timed. See Trial Tr. at 119-21 (testimony of Joseph

Vaccaro). Andrew Vaccaro, Sr. suffered a heart attack

and underwent heart surgery. Flooding destroyed 80% of

VFI's 4000-acre wheat crop two weeks before harvest.

Diesel fuel prices doubled, interest rates stood at over

20%, there was a federally-imposed grain embargo, new

diseases were infesting crops, and commodity prices

dropped to a thirty-year low. The value of the land

purchased by VFI plummeted to 50% of its purchase price

within the first year of VFI's ownership.

VFI defaulted on the loan from Agribank in 1986, when

the loan's principal and interest amounted to almost

$3,700,000. VFI's attorney, Daniel Felton, negotiated

with Agribank and reached a mutually-agreeable solution.

All of VFI's 5000 acres of farmland was sold, and

$2,400,000 of the revenues generated from the sale went

to Agribank to partially satisfy Agribank's loan. VFI

continued to farm the land as a tenant farmer. Agribank

forgave approximately half of the remaining $1,300,000 of
-5-

the loan, while Andrew, Jr. and Joseph each executed a

promissory note--one for $300,000 and the other for

$345,000--to satisfy the remaining half. Andrew Vaccaro,

Sr. was no longer liable for the original debt.
-6-

Andrew, Jr.'s and Joseph's notes were secured by a

lien on their remaining real estate, by a second lien on

crops and equipment, and by an assignment to Agribank of

the proceeds from the American Life and Executive Life

policies insuring Andrew Vaccaro, Sr. Andrew Vaccaro, Sr. had

originally purchased the policies to give his children an inheritance, and Billingsley and

Hiegel reluctantly agreed to assign the proceeds from the policies to Agribank.

Agribank reserved the right to make required premium

payments on the two life insurance policies, but was not

required to do so.

VFI was restructured as a partnership between Andrew,

Jr. and Joseph. In 1991 the partnership defaulted on the

notes, went into bankruptcy, and Andrew, Jr.'s and

Joseph's personal liabilities were discharged.

Prior to 1991, Andrew, Jr. and Joseph paid all of the

premiums on the American Life and Executive Life

policies--an amount over $250,000. While Billingsley and

Hiegel did not pay any of the premiums, they also did not

receive any income from the farming operation to which,

they assert, they were entitled. The premiums became

more and more expensive as Andrew Vaccaro, Sr. aged, and

in 1991 the combined annual premiums of the policies

amounted to approximately $56,000. By the end of 1991,

Andrew, Jr. and Joseph were unable to pay the premiums.

In late 1990, Andrew, Jr. and Joseph's attorney,

Daniel Felton (who had represented VFI), negotiated with

Agribank to have Agribank assume responsibility for the

payment of the premiums. John Jordan, the Agribank

Senior Special Credit Officer who serviced the loan from

1988 through 1991, handled the negotiations for Agribank.
-7-

The one offer Agribank made to become legally responsible

for the premium payments was rejected by the Vaccaros on

December 26, 1991, because it would have made Andrew

Vaccaro, Sr. again liable for the loan. Although not

legally responsible for the premiums, Agribank paid the

$9100 quarterly Executive Life premium for October 1991

on December 19, 1991.
-8-

In several "very frank" conversations with Andrew,

Jr. and Joseph, Jordan made it clear that Agribank knew

the importance of maintaining the policies. J.A. at Tab

77 (memorandum from Jordan to Don Zwicker, Regional Vice

President of Agribank). As early as December 31, 1990,

Jordan advised Agribank that "[i]nsurance premiums on the

required life insurance are extremely expensive, but the

borrowers [the Vaccaros] have continued to pay these

premiums. If they did not, I would recommend that

[Agribank] advance the premiums as, from a very 'cold'

perspective, insurance proceeds will likely eventually

allow the two notes to be paid in full." J.A. at Tab 76

(Loan Analysis Update). Prior to February 21, 1991,

Jordan again met with the Vaccaros. Describing this

meeting, Jordan wrote:

[W]e will be facing a problem next year. The

insurance premiums are now $56,000 per year.

[The Vaccaros] see no way to make these payments

and pay the higher payment schedule that will

kick in at that time.

We had a very frank discussion. They realize

their father is in poor health. They also

realize that the only way to ever pay the

$645,000 account is through the insurance. They

propose that the most important factor is to

keep the premiums paid. They further propose a

slight increase in the payment schedule, also a

possibility of lowering the level at which the

additional payment provision would kick in.

I am in full agreement with their general

proposal as I agree that the most important

factor is to keep the insurance in force.

J.A. at Tab 77.
-9-

Jordan communicated with the insurance companies

through Louie Devereux, Andrew, Jr. and Joseph's

insurance agent. Jordan learned that Agribank "[c]ould

use up all cash surrender value [of the policies] on

[the] front end. Would run each for one year or longer,

depending on interest rate." J.A. at Tab 84 (Aug. 30,

1991 
Devereux subsequently communicated with Executive Life that "[t]he assignee 5

[Agribank] is sending you a check from their St. Louis office under separate cover for

the quarterly premium due in October. They will send another quarterly premium in

January for the premium due 1/26/92." J.A. at Tab 91 (Dec. 19, 1991). Devereux sent

copies of this letter to Jordan, the Vaccaros, and Felton. While Agribank did make the

initial payment, Agribank never made the January 26 payment, nor did it notify the

Vaccaros or Felton that it failed to make the second payment.

-10-

memorandum). In an Agribank "Loan Approval/Action

5

Worksheet," Jordan noted that "we don't have any choice

but to pay the insurance premiums." J.A. at Tab 86 (Nov.

26, 1991).

On December 26, 1991, after Agribank paid one

premium, Jordan and Felton had a final discussion

regarding the request that Agribank accept the legal

obligation to pay the life insurance premiums. In

memorializing this discussion on December 31, 1991,

Jordan wrote:

Telephone call to Dan Felton, Atty. Has had

further discussions with his clients. They just

simply do not want their father involved again.

That is why they gave [Agribank] everything they

did in 1986. Will not agree to our terms at

present. They also agree that the original

agreement already allowed for what they were

proposing and that they were raising the annual

payment amount. . . .

I reminded [Felton] that the account was

delinquent due to the insurance being paid.

That I would assume that a collection action

would be initiated. That regardless of what

happened from a legal standpoint (foreclosure,

bankruptcy, etc.) that [Agribank] would continue

to make the insurance payments and eventually
-11-

would be paid in full.

He is in basic agreement with everything and

hopes that his clients and [Agribank] can still

have an ongoing relationship, that the meeting

with the Little Rock attorney and/or the outcome

with the operating lender could change

everything.
In a subsequent internal Agribank memorandum, Jordan wrote: 6

Telephone call from Teresa, insurance office, Ron Worth called from

Executive Life. Has check in hand and everything is taken care of until

1/26/92 installment.

Follow up to make sure a copy of the statement is received. I assume

[Agribank] will make that installment.

J.A. at Tab 102 (Jan. 2, 1992).

-12-

J.A. at Tab 98 (Dec. 31, 1991) (emphasis added). During

his conversation with Felton, Jordan also said that he

would always recommend that Agribank pay the premiums,

but that Agribank was not contractually required to pay

the premiums. See J.A. at Tab 132, 676-78 (testimony of

Felton).6

Shortly after his conversation with Felton, Jordan

moved to another position at Agribank and stopped

servicing the Vaccaro account. On January 16, 1992,

Kevin Schieber, the Manager of Special Credit for

Agribank, recommended in an internal memorandum that

Agribank "quit paying" the insurance premiums. See J.A.

at Tab 107 at 503. The memorandum noted that Executive

Life was facing bankruptcy and that the cost of the

premiums was likely to rise.

Thereafter, Agribank decided to stop paying the

insurance premiums. Agribank never notified Felton or

the Vaccaros of this decision. Andrew, Jr. and Joseph

continued to receive insurance premium notices on a

quarterly basis, but discarded them.
-13-

Because no one else was paying the premiums, the

American Life and Executive Life premiums were paid out

of the cash value of the policies. The cash value of the

Executive Life policy ran out, and the policy lapsed in

April 1993. The American Life policy was still active

when Andrew Vaccaro, Sr. died on June 12, 1994.
-14-

American Life brought this interpleader diversity

suit to determine whether Agribank or the Vaccaros should

receive the proceeds from the $500,000 American Life

policy. American Life was dismissed as a party to the

action, and the Vaccaros and Agribank were left to

litigate their rights to the American Life policy

proceeds. The principal issues raised by the Vaccaros

and Agribank were the equitable issues of waiver and

estoppel. The district court empaneled a jury, and

allowed the jury to sit in an advisory capacity on the

equitable issues.

The jury returned apparently contradictory advisory

findings that all four of the Vaccaros had waived their

rights to the American Life policy proceeds, and that

Agribank was estopped from receiving policy proceeds as

against Billingsley and Hiegel, but not against Andrew,

Jr. and Joseph.

The district court found that, at the end of December

1991, the Vaccaros reasonably believed that Agribank was

going to pay the insurance premiums, and that Agribank

had a duty to notify the Vaccaros that it was not going

to pay the premiums. Further, the court found that the

Vaccaros had suffered in reliance on Agribank.

Billingsley testified that she had the money to pay the

insurance premiums, and the district court found that the

Vaccaros would have paid the premiums had they known that

Agribank was not making payments. The district court

therefore held that Agribank was estopped from asserting

its assignments to the American Life policy proceeds.

The district court rejected Agribank's argument for
-15-

waiver. While noting that "[t]he parties all agree that

the issues of estoppel and waiver are equitable . . .

[and] the Court must determine these issues," Mem. Op &

Order at 6, reprinted in J.A. at Tab 35, 240, the

district court's analysis of waiver did little more than

reconcile the jury's advisory finding of estoppel with

its advisory finding of waiver. The district court

stated:
-16-

[Agribank] submitted the issue of waiver to the

jury. The jury was instructed that [Agribank]

had to prove the following: (1) that the

Vaccaros knew they had a right to the Executive

Life policy proceeds; (2) that they voluntarily

surrendered that right; and (3) that the

Vaccaros intended that they would forever be

deprived of the benefits of the Executive Life

policy proceeds. The jury found that all the

Vaccaros had waived their rights to the

Executive Life insurance policy proceeds.

Arguably, the verdict appears inconsistent;

that is, having found waiver, the Vaccaros

cannot prove estoppel. In an attempt to

reconcile the inconsistency, and in light of the

evidence presented to the jury, the Court is of

the opinion that the jury understood the

instruction to refer to the Vaccaros’ actions in

assigning the Executive Life policies to

[Agribank]. That is, based on the instruction

and the evidence, the jury could have found that

the Vaccaros had voluntarily assigned their

rights to the Executive Life policies. Such a

finding, however, does not preclude a finding by

the jury or the Court that [Agribank] is

estopped to enforce its rights under the

Assignment of the All American policy.

Furthermore, a finding of estoppel is consistent

with the jury's verdict regarding another action

by [Agribank], that is, that [Agribank]

negligently impaired the collateral.

Id. at 9-10, reprinted in J.A. at Tab 35, 243-44

(emphasis in original).

After adjusting for Agribank's setoff rights, the

district court ultimately allocated the American Life

policy proceeds to the parties in the following amounts:
-17-

Agribank: $191,703.33

Billingsley: $134,919.16

Hiegel: $134,919.16

Andrew, Jr.: $ 39,067.50

Joseph: $ 39,067.50
-18-

See Appellant's Br. at 14. The district court stayed its

judgment, however, and the American Life policy proceeds

remain in the registry of the district court. Agribank

now appeals.

II.

Arkansas state law applies in this case, and this

Court reviews the district court's interpretation of

state law de novo. See Salve Regina College v. Russell,

499 U.S. 225, 231 (1991). Findings of fact, however, are

reviewed for clear error. See Fed. R. Civ. P. 52(a).

Under Arkansas law, the determination of whether the

elements of estoppel have been met is a question of fact.

See Linda Elenia Askew Trust v. Hopkins, 688 S.W.2d 316,

319 (Ark. App. 1985).

The Arkansas Supreme Court has explained that the

following four elements are necessary to establish estoppel:

(1) [T]he party to be estopped must know the

facts;

(2) the party to be estopped must intend that

the conduct be acted on or must act so that the

party asserting the estoppel had a right to

believe it was so intended;

(3) the party asserting the estoppel must be

ignorant of the facts; and

(4) the party asserting the estoppel must rely

on the other's conduct and be injured by that

reliance.
-19-

Office of Child Support Enforcement v. Wallace, 941

S.W.2d 430, 433 (Ark. 1997). "The party asserting

estoppel must prove it strictly, there must be certainty

to every intent, the facts constituting it must not be

taken by argument or inference, and nothing 
-20-

can be supplied by intendment." Ward v. Worthen Bank &

Trust Co., 681 S.W.2d 365, 368 (Ark. 1984).

The first and third of these elements have clearly

been satisfied. Agribank knew that it was not paying the

insurance premiums and Agribank knew that the premiums

were not otherwise being paid. Further, the Vaccaros did

not know that Agribank had decided to stop paying the

premiums and had in fact stopped paying those premiums.

We conclude that the fourth element has also been

satisfied in this case. Agribank asserts that the

Vaccaros were not injured by Agribank's failure to inform

them that it would no longer pay the premiums because,

even if Agribank had so informed the Vaccaros, the

Vaccaros still could not have paid the premiums.

Agribank acknowledges that Billingsley testified that she

could and would have paid the premiums had she known that

Agribank was not paying the premiums. See Appellant's

Br. at 42; see also Trial Tr. at 378 (testimony of

Annette Billingsley that she was prepared to pay $56,000

in annual premiums indefinitely). Because Billingsley

had never paid any premiums in the past, however,

Agribank essentially argues that this testimony should

not be credited.

While we agree that it is convenient for Billingsley,

after the fact, to declare that she would have been

willing to pay $56,000 in annual premiums indefinitely,

it is uniquely the province of the trial court to weigh

the credibility of a witness's testimony. See United

States v. Heath, 58 F.3d 1271, 1275 (8th Cir.) ("A

district court's determination as to the credibility of
-21-

a witness is virtually unreviewable on appeal."), cert.

denied, 116 S. Ct. 240 (1995). Further, in light of

Andrew Vaccaro, Sr.'s failing health, the total value of

the life insurance policies, and the large amount of

money that the Vaccaros had already paid for the

insurance, we do not believe that the district court

clearly erred in finding that the Vaccaros could, and

would, have paid the insurance premiums had they known

that Agribank was not paying the premiums.
-22-

The closest issue is whether Agribank acted "so that

the party asserting the estoppel had a right to believe"

that Agribank intended to pay the premiums. Wallace, 941

S.W.2d at 433. Based on the conversations between Jordan

and Felton, internal Agribank memoranda, and the letter

from insurance agent Devereux to Executive Life, we

conclude that it did.

Beginning in 1990, the Vaccaros communicated to

Agribank the importance of maintaining the life insurance

policies and their desire for Agribank to take over

paying the premiums. Agribank repeatedly acknowledged

its understanding of the policies' importance to

Agribank's loan, and indicated that Agribank would

continue premium payments if the Vaccaros were unable to

do so. Agribank never contradicted the specific

expectation, documented by insurance agent Devereux, that

Agribank would make at least the January 1992 payment to

Executive Life.

Agribank did, in fact, pay the October 1991 premium

payment. In the final meeting between Jordan and Felton,

Jordan specifically told Felton that he assumed that

Agribank would pay the upcoming premiums. The totality

of these ongoing discussions and reassurances, coupled

with the payment of a premium and no statement that

Agribank would discontinue payments, would, we believe,

have led virtually anyone to reasonably believe that

Agribank would continue paying the premiums.

Agribank raises a host of arguments why the Vaccaros

should not have relied on these communications. Agribank

suggests that the Agribank internal memoranda were not

relevant to a finding of estoppel because the memoranda
-23-

were not accessed by the Vaccaros until after the policy

lapsed. This argument ignores that the memoranda

documented conversations between Jordan and the Vaccaros,

and were therefore relevant to indicate the content and

tone of the communications between Agribank and the

Vaccaros. Agribank further notes that Jordan was not the

ultimate decision maker at Agribank, and argues that

therefore the Vaccaros should not have relied on his

"assumptions." This disregards that Jordan was the

individual with whom the Vaccaros 
-24-

always communicated; while he may not have been the

ultimate decision maker, he was the individual who always

told the Vaccaros of Agribank's ultimate decisions.

Agribank raises two points which makes this a close

question, however. First, Agribank notes that the

Vaccaros rejected an explicit offer by Agribank to assume

legal responsibility for the premiums. In rejecting this

offer, Agribank contends, the Vaccaros cannot reasonably

expect to still receive the benefits of the bargain

without any of the liabilities.

The Vaccaros do not claim, however, that Agribank had

a legal obligation to pay the premiums. Immediately

after rejecting Agribank's offer, the Vaccaros were

reassured by Jordan that Agribank would continue paying

the premiums, although it was not legally required to do

so. By making this assurance and clarification, Agribank

effectively informed the Vaccaros that, although not

contractually required to make payments, Agribank would

continue to pay the insurance premiums. Accordingly,

this argument fails.

Finally, Agribank argues that the Vaccaros could, and

reasonably should, have independently learned that the

premiums were not being paid. For almost a year and a

half Andrew, Jr. and Joseph received premium notices from

Executive Life--notices which they discarded. Andrew,

Jr. and Joseph never contacted either the insurance

companies nor Agribank to ensure that everything was

proceeding according to their expectations. Because the

Vaccaros did not check on the status of the premiums,

Agribank contends, the Vaccaros had no right to believe
-25-

that Agribank was continuing payments.

It remains, however, that the Vaccaros never received

actual notice that the premiums were not being paid.

While a close question, we believe that it was reasonable

for the Vaccaros to presume that the premium notices were

informational only, and that Agribank was in fact

maintaining the policies.
-26-

In sum, we conclude that it was simply inexcusable

for Agribank to do all that it did to assure the Vaccaros

that Agribank would continue to make premium payments,

and then to decide--without a single phone call or letter

to the Vaccaros--that Agribank was not going to make the

premium payments. Had Agribank notified the Vaccaros of

its intent to discontinue the payments, the Vaccaros

could have paid the premiums themselves. Accordingly, we

affirm the district court's judgment on estoppel.

III.

Billingsley and Hiegel assigned their rights in both the

Executive Life and American Life polices to Agribank.

See Mem. Op. & Order at 4, reprinted in J.A. at Tab 35,

238. In so doing, Billingsley and Hiegel expressly surrendered

all rights to the policies. See J.A. at Tabs 56 and 57

(assignments of rights to life insurance policies

proceeds as collateral). Agribank contends that this

surrender constituted a waiver under Arkansas law, and

that Billingsley and Hiegel cannot claim estoppel to recover any

part of the American Life policy proceeds.

The Arkansas Supreme Court has explained that:

Waiver is the voluntary abandonment or surrender

by a capable person of a right known by him to

exist, with the intent that he shall forever be

deprived of its benefits. It may occur when

one, with full knowledge of material facts, does

something which is inconsistent with the right

or his intention to rely on that right.

Lester v. Mount Vernon-Enola Sch. Dist., 917 S.W.2d 540,
-27-

542 (Ark. 1996) (quotations omitted). Under Arkansas

law, waiver is usually a question of fact. See Bright v.

Gass, 831 S.W.2d 149, 153 (Ark. App. 1992).
-28-

Agribank's argument for waiver is meritless. In

their assignment of their rights to the life insurance

policies benefits, Billingsley and Hiegel pledged

$1,000,000 of total benefits to secure approximately

$720,000 of debt. The assignment of benefits was

explicitly considered collateral. Indeed, in the

documents that executed the assignments, Agribank agreed

that "any balance of sums received hereunder from the

Insurer remaining after payment of the then existing

Liabilities, matured or unmatured, shall be paid by the

Assignee to the persons entitled thereto under the terms

of the Policy had this assignment not been executed."

J.A. at Tab 56, ¶ E, § 1 and Tab 57, ¶ E, § 1.

Clearly, Billingsley and Hiegel did not intend to "forever

be deprived of" the life insurance policies benefits.

Lester, 917 S.W.2d at 542 (quotations omitted). Rather,

they anticipated receiving over a quarter of a million

dollars when the benefits of the policies were realized

and the debts to Agribank were satisfied. In light of

this anticipation, which was supported by the assignment

documents, Billingsley and Hiegel did not waive their

rights to the life insurance policies proceeds.

IV.

For the foregoing reasons, we affirm the district

court's holdings that Billingsley and Hiegel did not

waive their rights to the American Life policy proceeds

and that Agribank should be estopped from disclaiming

that $464,447.62 from the lapsed policy did not go to

satisfy Andrew, Jr.'s and Joseph's debts.
-29-

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.