992 N.W.2d 429
Neb.2023Background
- Jordon R. Wiggins’ divorce decree required each parent to maintain at least $250,000 of life insurance for the minor children; Jordon later died and his father Robert was appointed personal representative of the estate.
- Allison Hardy (ex-wife), as guardian for the minor children, filed a $250,000 claim against the estate alleging no qualifying life insurance for the children.
- Jason Wiggins (decedent’s brother), Allison, and Robert entered a settlement: Jason would “gift” $250,000 of life insurance proceeds to a trust for the children and Allison would withdraw the claim.
- After the settlement, parties learned Elizabeth (one child) was beneficiary of one employer policy ($120,000 paid directly to her); Jason received $240,000 from the other policy, paid $130,000 into the Trust, and retained $110,000.
- The parties jointly sought a declaratory judgment about rights/obligations under the settlement; the county court reformed the agreement to credit Jason and concluded the settlement satisfied the claim. Allison appealed.
Issues
| Issue | Plaintiff's Argument (Allison) | Defendant's Argument (Jason) | Held |
|---|---|---|---|
| Whether the settlement agreement should be reformed | Agreement as written reflects parties’ intent; no drafting mistake; enforce as written | Agreement should be reformed because mutual mistake about beneficiary/coverage justified changing the written terms | Reformation was improper: parties stipulated the written agreement accurately reflected their agreement, so reformation is not warranted |
| Whether the settlement agreement should be rescinded | No basis for rescission because written agreement reflects intent; Jason assumed risk of any mistake | Mutual mistake as to an existing, material fact (who held beneficiary rights) voided meeting of the minds and supports rescission | Court found mutual mistake of a material existing fact and held rescission is appropriate; agreement must be rescinded and parties returned to status quo |
| Whether Jason assumed the risk of mistake by signing language “to the best of the parties’ knowledge” | That clause shows Jason assumed the risk and therefore cannot rescind | Clause does not automatically shift the risk here; parties had been informed by insurers/employers and Jason did not have superior knowledge | Jason did not assume the risk of mistake; assumption-of-risk arguments rejected |
| Whether Jason must pay the remaining $110,000 into the Trust | Jason must deposit remaining proceeds so total available >= $250,000 as divorce decree contemplated | Settlement terms and subsequent facts mean Jason should not be forced to pay additional funds beyond what he paid | Court reversed county court’s reformation order and remanded to rescind the settlement; it did not order Jason to pay the $110,000 on appeal and directed further proceedings consistent with rescission |
Key Cases Cited
- Jantzen v. Jantzen, 257 Neb. 78, 595 N.W.2d 230 (1999) (governs effect of beneficiary designations in divorce-related contexts)
- R & B Farms v. Cedar Valley Acres, 281 Neb. 706, 798 N.W.2d 121 (2011) (reformation requires written instrument not to reflect parties’ true intent due to mistake or fraud)
- Malousek v. Meyer, 309 Neb. 803, 962 N.W.2d 676 (2021) (standards for appellate review in equity and when reformation/rescission are at issue)
- Newton v. Brown, 222 Neb. 605, 386 N.W.2d 424 (1986) (example of reformation for scrivener’s error where written instrument failed to express agreed reservation)
- Johnson v. Stover, 218 Neb. 250, 354 N.W.2d 142 (1984) (reformation where inequitable conduct caused deed to fail to describe agreed property)
- Farmers Loan & Trust Co. v. Suydam, 69 Neb. 407, 95 N.W. 867 (1903) (distinguishing reformation from rescission where mutual mistake of material fact prevents meeting of the minds)
- Stitch Ranch v. Double B.J. Farms, 21 Neb. App. 328, 837 N.W.2d 870 (2013) (rescission warranted where parties attached materially different meanings to an essential term)
- Cinatl v. Prososki, 307 Neb. 477, 949 N.W.2d 505 (2020) (equity aims to do justice; rescission restores parties to pre-contract status quo)